SEC approval of Silicon Valley-backed LTSE may fast-track startups' IPO path

Startups and bold, innovation-led private companies focused on long-term value creation may soon be able to shed their apprehensions about going public.

US regulators just approved the San Franciso-based Long-Term Stock Exchange's application to set up a new stock exchange that would enable bold and innovative companies to list on a platform that would emphasise long-term returns, a move away from the short-term profit-driven mindset of today’s traditional stock exchanges.

“We are building a market where companies are rewarded for choosing to innovate, to invest in their employees, and to seed future growth. And where companies can run their businesses with the stewardship that similarly aligned shareholders, stakeholders and society demand,” said LTSE Founder Eric Ries in a statement.

In November last year, the LTSE – which is backed by tech heavyweights like Peter Thiel and Marc Andreessen – filed its Form 1 application with the US Securities and Exchange Commission (US SEC) to register as a national securities exchange.

The SEC’s approval of LTSE’s application will allow the exchange to be one of only a handful of US exchanges where companies can list and authorise the company to operate a platform to buy and sell shares of listed companies.

“Our vision is that companies in every industry will be able to go public while continuing to prioritise and pursue strategies for long-term success. That's a step forward for all of us,” added Eric Ries.

The LTSE will, however, be subject to the same regulations that govern the traditional stock exchanges. It will also operate electronically, fielding trading orders to buy and sell listed securities over ultra-high-speed lines.

How it will differ is that companies that list on LTSE will adopt a set of governing practices that will empower long term-investors and help companies build lasting businesses.

“For example, we expect that companies listed on LTSE will, among other things, develop indicators of progress toward long-term success and link executive pay to long-term performance. And that they will disclose investments in long term-focused research and development, and explain their approaches to community, diversity, and the environment,” said Zoran Perkov, operations head at the exchange.

In addition, LTSE expects to make most of its money from providing companies software and services that can enable them to thrive over the long term. This would also differ from existing stock exchanges that record their revenue mainly from trading and data generated from it.

“We hope that LTSE will encourage companies to list with the peace of mind that going public will enable them to advance their vision over time. If we succeed, LTSE will have helped to reverse a trend in which the preoccupation with the short term that plagues many public markets has spurred some founders to put off going public or to avoid doing so altogether,” said Perkov.

Also read: Serial entrepreneur Eric Ries plans to create a totally new stock exchange


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