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The Almighty Buck United States

US Approves NYSE Listing Plan To Cut Out Wall Street Middlemen (reuters.com) 51

Posted by BeauHD from the directly-to-investors dept.
Companies may go public on the New York Stock Exchange without forking out fat fees to Wall Street banks which typically underwrite such capital raisings, the U.S. securities regulator said on Tuesday. Reuters reports: The Securities and Exchange Commission approval of the NYSE's "direct" listing plan threatens to overhaul the U.S. initial public offering market, by allowing aspiring public companies to sell shares directly to investors. Investment banks have for decades organized IPOs, marketed them to institutions, and supported the stock via their trading desks. The change, following months of industry haggling, will help reduce what critics call excessive underwriter fees, a major barrier to companies looking to go public. Investor groups, however, warned it could diminish their protections as the banks perform due diligence on the companies.
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US Approves NYSE Listing Plan To Cut Out Wall Street Middlemen More

US Approves NYSE Listing Plan To Cut Out Wall Street Middlemen

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  • Whatever will business do without banks protecting them.

    • Re:Oh no. (Score:4, Insightful)

      by ShanghaiBill ( 739463 ) on Wednesday December 23, 2020 @06:34AM (#60859336)

      Investment banks are leeches. They suck up about 7.5% of GDP while adding nothing of value.

      Instead of using underwriters, IPOs should be done via a public auction directly to investors.

      This is a welcome reform. It is nice to see that the swamp is finally being drained.

      • Re: (Score:2)

        by cusco ( 717999 )

        Just in time for the Airbnb IPO, IIRC.

      • Although I welcome the change itself, I consider the loss of a player an increase in risk to the investor. I don't think mutual funds "managing" retirement vehicles should be allowed in the initial bidding. They are supposed to target safer options.

        So I am for the deregulation due to it now being a choice for the company and those willing to bet their own finances on it; have at it.

        • That was my reaction too. The banks are leeches, but this change transfers all of the risk to the sucker^H^H^Hpublic. Give it a few years and we'll have a GFC-equivalent meltdown as dishonest players figure out how to monetise the removal of the current safety handbrake. The reason why financial regulations exist is to mitigate risk, even if their main perceived effect is to enrich banks. Once you remove the safety features, you eventually get to learn first-hand about why they were there in the first p

      • Instead of using underwriters, IPOs should be done via a public auction directly to investors.
        This is a welcome reform. It is nice to see that the swamp is finally being drained.

        I like this plan, genius!

        By inviting everyone and their mother to come stand directly in the swamp, the swamp goes away, because that's how displacement works.

        #WCGR

      • I can see both sides of the coin here, as it will be harder for individuals to vet any single IPO for risk. However, let's be honest: the average IPO is loaded with risk (to put it politely) and the banks ensure that "preferred" customers gain early access to shares at open for the exact initial price, which they can easily sell for a big profit on the first day of trading, so they can cover the cost of the rest of their shares (at a minimum) in case the stock skyrockets later. Not that they have to buy tho

        • According to Davis Polk [davispolk.com], via Matt Levine [bloomberg.com]:

          We note that while there would be no underwritten IPO or underwriters, existing SEC rules do require that investment banks participate as financial advisors and accept underwriter liability, so that the basic registration and due diligence process will remain largely as it is for underwritten offerings.

          As an example, both Slack and Spotify recently performed direct listings, but still worked with investment banks for much of the process, and those IPOs went pretty smoothly. With the old rules, only existing private equity holders (e.g. investors and employees) could sell shares during those direct listing IPOs, but the company was not allowed to issue shares to raise capital during the IPO. This rule change lifts that restriction.

    • Itâ(TM)s the governments who protect the banks in turn. Thatâ(TM)s the protection they are losing

      • Banks, backed by government funds, are the reason we have massive boom/bust cycles. Forget not stabilising things, they are actively causing swings with their stupid speculative interventions.

        • Re: (Score:3, Informative)

          by ShanghaiBill ( 739463 )

          There were "panics" long before we had central banks. The expansionary monetary policies of the American banking system during downturns makes financial cycles less severe.

          • Comment removed based on user account deletion

            • Re: (Score:2, Informative)

              by SkonkersBeDonkers ( 6780818 )

              Watch and learn. [youtube.com]

              known kook and possible white supremacist, at minimum has no problem consorting with them to further his own agenda

              which just as an aside, anarcho-capitalism and communism are essentially the same end goal and both are flawed in that they fail to take into account that power abhors a vacuum, get rid of one state and a new one will arise to take its place

              • Re: (Score:2, Offtopic)

                by account_deleted ( 4530225 )
                Comment removed based on user account deletion

                • (disclosure, copied from the wiki entry on the 1920 recession which summarizes a paper written in response to Woods' theory)

                  - the most substantial downsizing of government was attributable to the Wilson administration, and occurred well before the onset of the 1920–1921 recession.

                  - the Harding administration raised revenues in 1921 by expanding the tax base considerably at the same time that it lowered rates.

                  - Woods underemphasizes the role the monetary stimulus played in reviving the depressed econom

            • Re: Oh no. (Score:2, Informative)

              by peragrin ( 659227 )

              Except inflation is a sign of a growing economy. If you aren't growing then you are going backwards.

              When you get runaway inflation you have issues. And when you get a decade of no inflation you have issues.

              The bigger issue is the usa let's congress set the tax rate and budget and then let's an independent panel set the interest rate. This helps keep things separate but when congress cuts taxes it stimulates the economy. Except if the economy doesn't need a stimulant to counter rising inflation then you c

              • Except inflation is a sign of a growing economy.

                No, inflation is a sign that the money-supply is growing faster than the economy.

                Mind you, it's pretty much impossible to keep the money supply exactly in sync with production. So there is always going to be either inflation or deflation happening. And since deflation causes more problems than inflation, it's better to aim for a slight inflation.

                Note that increasing the money supply by 25-30% in a year is a bad thing, even when it's absolutely necessary (Y

              • when congress cuts taxes it stimulates the economy.

                [Citation needed]

                Which is why 2 years after trump's tax cuts the economy was in a recession.

                This seems to argue it does not stimulate the economy to cut taxes.

                (oddly enough every republican presidents has crashed the economy)

                This feels true, but I don't have a source.

                9out 11 last recessions where caused by republican leadership using the wrong tools at the wrong time.

                What were the other two? Are you saying the 1929 was the fault of the Republicans? How

            • Re: (Score:2)

              by ceoyoyo ( 59147 )

              That's not the monetary policy during a downturn. That's the failure to return to growth policy when the economy recovers.

              You're both right.

          • There were "panics" long before we had central banks. The expansionary monetary policies of the American banking system during downturns makes financial cycles less severe.

            a) What happens when it's the banks themselves that cause those "downturns"? (eg. The recent-enough-to-remember housing crisis)

            b) What happens if those "expansionary monetary policies" allow bankers to get very rich during the downturns, instead of sending them to prison where they belong?

            • Then you still don't get massive bank runs.

              The only way to truly insure traditional deposits is with the printing press. The only alternative I see is full reserve banking and forbidding guaranteed pay out funds which would just create alternative checking accounts vulnerable to runs ... people are suckers for interest and promises of zero risk, you can not let the free market fill that demand. Without a government printing press backstop everything needs to be marked to market or cold hard cash.

              • As I understand it, the FDIC charges a small fee (to the bank) and has limited coverage. Couple that with mandated minimums on reserves and rules on how money can be invested and there should always be sufficient assets to cover deposits without printing money.

            • The banks didn't cause a downturn. Idiots investing in the mortgages like the stock market did.

  • Swamp draining (Score:4, Insightful)

    by Joce640k ( 829181 ) on Wednesday December 23, 2020 @06:42AM (#60859346) Homepage

    So... the swamp draining starts when there's only a few of days of presidency left.

    I wonder who pissed him off?

    • So... the swamp draining starts when there's only a few of days of presidency left.

      I wonder who pissed him off?

      Draining? Please.

      The new Swamp Manager is already carrying around a fistful of Plugs, sponsored by the TDS Alliance of Liberated Corporations pushing their Business As Usual campaign.

      Pay no attention to the briefcase full of...uhh...tchotchkes. Yeah, that's it.

    • Perhaps this is just so that one of his upcoming news media business ventures can go public without the usual bank-related scrutiny. Who pissed him off? Those who believe in the rule of law.

    • the ones who want to list on the stock exchange just had more money than the ones who wanted to skim from the former. That's all. It's got nothing to do with the swamp. Swamp's Ok, functioning nominally.

  • Comment removed (Score:4, Insightful)

    by account_deleted ( 4530225 ) on Wednesday December 23, 2020 @07:16AM (#60859370)
    Comment removed based on user account deletion
    • The underwriting process protects you from outright fraud when a company goes bankrupt after its IPO. The fees are too high (especially in some specific cases), but as an investor I think this is a very bad idea. There is no way for an individual perspective investor to be able to audit the books of a company pre-IPO.

    • If you're depending on an IPO's underwriter to do your homework, you shouldn't be buying IPO shares at all.

      Ok, caveat emptor and all that jazz, but the stock market sliding towards Kickstarter is good how?

      Someone seriously looked around and said, "You know what's wrong with the economy today, Jim? Startups need an easier time raising funds, from soccer moms on Robinhood!" During a bubble, naturally, because there's no better time to play shell games with risk when everything always goes up, and nothing bad can happen.

      This isn't draining the swamp, this is tickets to the swamp, because we knocked down a box sec

  • Whenever I didn't do my own DD, the outcome was less than optimal.

    Yes, the workload can be high, but you can form investor clubs or invest alongside friends that you really trust.

    You should be at arm's length, and that is seldom possible with a bank.

    • Know Your Limits (Score:5, Interesting)

      by ytene ( 4376651 ) on Wednesday December 23, 2020 @08:57AM (#60859478)
      Whilst I would always agree with you that performing your own due diligence is essential, and whilst I don't want to come across as arguing with you for the sake of it, I think it might be sensible to add a note of caution here.

      Performing due diligence on an existing, established and publicly-listed company [before making an investment] typically requires a sophisticated investor. You need to be able to read and understand a 10-Q [just for starters] and should have a good idea of the company's marketplace, management, strategy, debts, etc.

      Performing due diligence at IPO, i.e. at a point in the history of a company when it has no established track record, multiplies the risks by as much as one or more orders of magnitude. Whilst it might be reassuring for someone to make investment decisions "alongside friends that you really trust", if you are, by definition, inexperienced, then how are you going to be able to objectively evaluate the experience of your "friends" and know that they are qualified to give you good advice?

      Investor clubs might be an interesting way to learn more about the information resources needed for investing, but here, again, care is needed. If you buy financial advice from someone who is an RIA (Registered Investment Advisor), CFP (Certified Financial Planner), CFA (Certified Financial Analyst), CIC (Chartered Investment Counsellor), ChFC (Chartered Financial Counsellor), and/or PFS (Personal Financial Specialist), then from the outset you should be able to make a reasonable determination as to the acumen of the advisor. If you form or join an investor club, there is always the chance that someone may be offering inadequate or unethical advice - and you'd never know.

      KT19284 is entirely correct in saying that due diligence is essential before making an investment... but that needs to extend to being diligent about the person/people from whom you take your investment advice.

      As the old saying goes, "A fool and his money are soon parted..."

      • Re: (Score:2)

        by cusco ( 717999 )

        Even then you're vulnerable to the possibility that their financial statements are full of lies. It happens to the most sophisticated of investors too, after Mercedes Daimler agreed to buy Chrysler they ended up filing charges of fraud against the Chrysler Board of Directors because their financial statements varied from exaggerations to outright fiction.

        • Re: (Score:2)

          by ytene ( 4376651 )
          You're absolutely correct.

          But maybe another way to look at it is to compare investing with going to court. Yes, if you find yourself in court [either as a plaintiff or a defendant] you can elect to represent yourself. There is no obligation for you to have legal counsel.

          But the law is complex, subtle, can turn on subtle interpretations and can be powerfully argued by an expert well versed in both statute and relevant case law.

          If you found yourself required to go to court on a matter that could have

    • Yes, the workload can be high, but you can form investor clubs or invest alongside friends that you really trust.

      And that's a lot of work, so the friends who are really good at it are going to invest a lot of hours. You should buy them a bottle of wine. And since the marginal cost of them sharing the work approaches zero, they can do that for a lot of friends. That's a lot of bottles of wine! And then, that's too many to drink, so maybe they sell some bottles. But that's inefficient to buy and then res

  • Comment removed (Score:4, Insightful)

    by account_deleted ( 4530225 ) on Wednesday December 23, 2020 @09:04AM (#60859496)
    Comment removed based on user account deletion

    • Re:One little detail... (Score:4, Interesting)

      by aaarrrgggh ( 9205 ) on Wednesday December 23, 2020 @11:32AM (#60859818)
      You might not want instant, irreversible clearing of stock transactions; I sure as hell don’t! The exchange’s role (and cost) has diminished dramatically over the past 3 decades with technology. Alternative exchanges have popped up to keep them in check. With blockchain all you would know is that you purchased XXXX at $YY; you would lack the protections offer for invalid trades, invalid pricing, etc. Maybe not everybody cares about those things, but I sure do. For some of us, the stock market is not Vegas.

      • Nothing about a blockchain makes protections for invalid trades/pricing/etc. undoable. You can totally build a blockchain with revockable transactions (given well-established criteria.

        Not that that matters too much to me, because my trades all go through a federally monitored trading house that has its own liability rules - their software's liability on the NYSE isn't my concern.

    • Re: (Score:2)

      by Bengie ( 1121981 )
      NYSE could host the blockchain. Someone has to. Distributed blockchains are slow, or at least current implementations. As long as the raw blockchain is transparent and can be validated, the service provider can still provide value.

      • What's the value of the blockchain with a centralized signer? Why not just have the signer list all account balances?

        • Re: (Score:2)

          by Bengie ( 1121981 )
          I never said centralize signer, just centralized processor and host. Possibly federated. Each link in the chain could be double signed. The client making the request, and then the host signing that.
          • And what's the literal benefit of that over having a centralized authority with account sums?

            • Re: (Score:2)

              by Bengie ( 1121981 )
              Transparency. It wouldn't be a black box of a number with a forged audit trail. That's kind of the whole problem right now. Current financial systems are assumed to be doing the right thing and have lots of regulations. Everything moves slowly because mistakes are easy to occur, regulations are difficult to change, and audits are expensive.

              With a transparent block-chain, most of those procedural regulations go away because the only way to control the money is to control the secret, and the secret is kept
    • It's a solution looking for a problem. We do not have an issue with tracking transactions or handling payments right now.

  • Next we will be buying/selling company shares in Amazon/Ebay

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