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SEC chairman fine with companies eschewing traditional underwritten IPOs

U.S. Securities and Exchange Commission Chairman Jay Clayton is not going to stand in the way of companies looking to go public through a direct listing.

Clayton said he is not against direct listings, which allow companies to eschew traditionally underwritten offerings and place shares directly on a public exchange. He noted that direct listings provide shareholders with proper protections.

"It will be interesting to see how many companies have the size and following to be able to do that," Clayton said in an interview after taking part in a discussion during the Tulane Corporate Law Institute conference on March 14.

In 2018, Spotify Technology SA completed one of the more high profile direct listings. Slack Technologies Inc. is also considering a direct listing, and if the company is successful, advisers believe it could lead to more of this type of deal.

For companies going public, the direct listing process can reduce the fees paid to investment banks. Watford Holdings Ltd. considered listing its shares without underwriters, calling the approach a "novel method" in its Form S-1 filing. However, the reinsurer said a drawback to a direct listing is that it could lead to more stock price volatility than a traditionally underwritten deal.