The SEC has given the go-ahead for a new US exchange – the Long-Term Stock Exchange (LTSE).
Designed for high-growth tech companies with long-term prospects and investors that understand startups, the San-Francisco-based LTSE has big ambitions: to allow startups to list on the public market while focusing on research, to let long-term investors cash in on fast-growing startups and to provide the tools to support both parties.
It is arguably the second point that is the platform’s most distinctive proposal: a focus on long-term voting rights, whereby shareholders will be granted more voting power the longer they own a stock.
To achieve this, LTSE will require that companies reward their executives based on long-term goals rather than short-term profits and to disclose long-term plans and investments.
The exchange concept was created and put to the SEC in November by technology entrepreneur and startup adviser Eric Ries, who has been developing the idea for some time having raised $19 million from venture capitalists to get his project off the ground. Approval from the SEC was needed in order to launch the exchange.
‘We are building a market where companies are rewarded for choosing to innovate, invest in their employees and seed future growth, where companies can run their businesses with the stewardship that similarly aligned shareholders, stakeholders and society demand,’ Ries says in a statement.
LTSE’s next step is to submit its listing standards to the SEC.
The SEC is considering or has taken various actions designed to boost companies’ participation in the public markets. For example, it has proposed expanding the scope of the so-called test-the-water regulatory measure that allows prospective issuers to gauge market interest in a possible IPO or other registered securities through discussions with certain investors before deciding whether to file a registration statement.
This accommodation is at present available only to emerging growth companies (EGCs), but the SEC is proposing making it available to all issuers, including investment companies.
The test-the-water tool was introduced under the Jumpstart Our Business Startups Act. Following on from that, the agency’s division of corporation finance in 2017 extended another EGC reform to all issuers: the ability to initially submit certain filings in draft, non-public form as they begin the process of becoming a public company.