Performance and fraud concerns deterring stock exchanges from listing Reg A+ IPOs

Lackluster post-IPO performances and fraud concerns have turned Nasdaq and the New York Stock Exchange away from Reg A+ IPOs, per a Wall Street Journal report. Nasdaq has proposed that the Securities and Exchange Commission (SEC) stiffen its Reg A+ listing rules, while NYSE has reportedly begun eschewing Reg A+ listings entirely.

This move comes amidst the SEC’s suit against LongFin over organizing an allegedly fraudulent Reg A+ public offering. After the IPO, the company’s shares soared more than 2,500% in response to the news that it had acquired a cryptocurrency business.

To accelerate the IPO process and make it easier for small firms to get financing, Reg A+ listings usually have lower accounting and disclosure standards than conventional offerings, according to the Wall Street Journal. In 2017, exchanges witnessed a string of companies going public under Reg A+, with some trading above their IPO prices while others, such as LongFin, under public scrutiny.


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If the SEC approves Nasdaq's proposal, the exchange will only consider companies that are at least two years old for Reg A+ listing. Meanwhile, although Nasdaq’s new rules would help the exchange better weed out less-established companies, it may also discourage some companies from listing on the exchange, according to the Wall Street Journal.

“We continuously examine our listing standards for all companies,” a Nasdaq spokesman told the Wall Street Journal. “We identified a need to enhance the rules in this area and align with our commitment to investor protection."

Compared to conventional IPOs, Reg A+ listings open the floodgates for many less-established firms to access a wider investor pool. Data from Manhattan Street Capital shows that Reg A+ companies raised a total of around $1.5 billion in 157 offerings from 2015 to 2018. Only 11 of these companies had their IPOs on Nasdaq or NYSE American, including LongFin.

About Author

Celia joined The Block as a reporter after earning her BA in the History of Science from the University of Chicago. Having spent years pondering over why 2+2 cannot equal 5, she is interested in the history and philosophy of mathematics, computation, and cryptography. She also had a very brief stint at Crunchbase News.