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Direct Listings Harm Investors and Undermine Market Confidence

Direct listings involve virtually none of the due diligence standards or legal remedies that benefit Main Street shareholders.

WASHINGTON – The American Securities Association (ASA) today submitted a comment letter to the House Financial Services Committee ahead of its hearing examining direct listings, SPACS, and the need for more investor protections. In the letter, ASA outlined how direct listings harm investors, recommended additional disclosures for SPACs, detailed how Communist China is abusing the JOBS Act, and called on Congress to direct the SEC to reorient the IPO process back towards its historical purpose of investor protection and small business capital formation.

“The goal of our IPO market should be to help young, growing businesses in the United States access the capital they need to get to the next level of growth, and for American investors to be able to invest early in the lifecycle of these businesses,” said ASA CEO Chris Iacovella. “Sadly, today’s IPO market is defined by large companies who view an IPO as a self-serving liquidity event, rather than a vehicle for growth and American job creation.”

Direct Listings

“Direct listings involve virtually none of the due diligence standards or legal remedies that benefit Main Street shareholders,” Iacovella wrote in the letter. “In an age of overvalued “unicorns” – many of which consider IPOs or choose to go public – the role of underwriters is even more important. Imagine what would have happened if fallen unicorns such as Theranos decided to go public via direct listing before their risks became widely known.”

“Or take the more recent example of Coinbase, a cryptocurrency exchange that recently went public with a direct listing. Its share price plunged after Silicon Valley insiders unloaded shares on the public through a direct listing last month. More concerning, within a month of its direct listing, the company completed a secondary offering that further devalued the equity of its public shareholders who bought in April. The stock currently trades almost 20% below its direct listing price and 35% below the high it made right after listing. Did retail investors benefit from this listing or did it only serve to enrich a handful of insiders?”


As the Committee examines the SPAC market, the ASA recommended SPAC sponsors should be required to provide disclosure regarding their economic stake and potential outcomes from a future merger transaction. Additionally, certain enhanced disclosures may benefit investors in SPAC transactions. For example, SPACs should clearly disclose to investors that a deal may not come to fruition and that shares may only be redeemed at a certain price. Investors should also be provided with merger information and a proxy statement (or a summary document of the merger document), including information for how the valuation was calculated.

Communist China’s Exploitation of the JOBS Act

“The JOBS Act was explicitly passed to make it easier for small American companies to access the capital they need to grow their businesses and create jobs in the United States,” Iacovella wrote. “Unfortunately, foreign companies in developing countries, especially those from Communist China, have been availing themselves of this law in record numbers, listing on American exchanges, and then sending the capital they raise out of the United States. With the Chinese Communist Party planning to list over sixty new companies on American exchanges this year, ending this perversion of the JOBS Act should be a priority for the Committee before any more harm is done.”

To read ASA's full letter to the Committee, click here.


ASA’s regional financial services companies work in communities across the country to create jobs, grow the economy, and increase prosperity for all Americans. The ASA exclusively represents the capital market and private client interests of its members and seeks to promote free market principles making it easier to access financial advice and capital. ASA members help Americans save for retirement, provide Main Street businesses with capital to grow, and advise hardworking Americans how to create and preserve wealth. For the latest updates follow @AmerSecurities and learn more at


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