Direct Listings

Direct Listings can be distinguished from IPOs:

• • In a direct listing, a company does not issue new shares or raise capital. Instead, existing shareholders, such as employees and investors, sell their shares directly to the public on the stock exchange.

  • There is no underwriting process or price-setting by investment banks. Instead, the market determines the price of the shares based on supply and demand.

  • Direct listings do not involve a traditional roadshow, although companies may still engage in informational sessions with potential investors.

  • Since there is no issuance of new shares, the company does not raise any capital through a direct listing.

  • Direct listings do not typically have lock-up periods, allowing existing shareholders to sell their shares immediately if they choose.

In summary, the key differences between a direct listing and an IPO lie in the process of going public, the involvement of investment banks, the pricing mechanism, and the implications for raising capital and shareholder liquidity.

See also Public Equities.