Concerns Over Reg A+ IPOs on Nasdaq and NYSE
Concerns about poor post-IPO performance and potential fraud have led Nasdaq and the New York Stock Exchange to reconsider listing Reg A+ IPOs, as reported by the Wall Street Journal. Nasdaq has suggested to the SEC that Reg A+ listing rules be made stricter, and NYSE is reportedly avoiding these listings altogether. The SEC's legal action against LongFin, accused of fraudulent Reg A+ IPO practices, emphasizes these concerns. LongFin's shares surged over 2,500% after it announced a cryptocurrency acquisition. Reg A+ IPOs were designed to expedite the IPO process for smaller companies, often requiring lower accounting and disclosure standards. However, this also opens up potential for less-established firms to enter the market. If Nasdaq's proposal is accepted, only companies at least two years old may qualify for Reg A+ listing. This could limit opportunities for newer firms, but Nasdaq believes the change will enhance investor protection. Reg A+ listings allow emerging companies to reach a broader investor base, having collectively raised about $1.5 billion between 2015-2018. However, only a few such IPOs happened on major exchanges like Nasdaq and NYSE.
FAQ
❓ What are Reg A+ IPOs?
Reg A+ IPOs are public offerings with simpler disclosure rules aimed at helping smaller companies raise capital quickly.
❓ Why are exchanges cautious about Reg A+ listings?
Exchanges are concerned about the risk of poor post-IPO performance and potential fraud associated with less-established companies.
❓ What changes are being proposed for Reg A+ IPOs?
Nasdaq is proposing stricter rules by requiring companies to be at least two years old before listing under Reg A+.