An IPO is 2 things:
1) Transferring ownership from existing investors to new investors
2) Raising capital.
You can't really do 2 with a direct listing. Companies IPO mostly because they need money not because investors want liquidity
1) Transferring ownership from existing investors to new investors
2) Raising capital.
You can't really do 2 with a direct listing. Companies IPO mostly because they need money not because investors want liquidity
It's needless to say a direct listing has never been done this way.
With the market being this hot (IMO it's a bubble, but only time will tell), enough public investors are clamoring over IPOs that companies could likely get away with a direct listing like this. Given an extended market downturn though (say, if 2008 happens again), companies will likely find those same public investors to be a lot less eager to snatch up new share offerings.
> A company can also sell its shares in the open market to raise capital following a direct listing without restrictions, typically after it has reported quarterly earnings. Some companies opting for direct listings also choose to raise money before they go public through private fundraising rounds.
(i.e. direct listing was restricted to only shares held by not-the-company)
> The NYSE now offers companies the option to raise money in a direct listing after the U.S. Securities and Exchange Commission approved it in December.
I wonder #2 is more important for some businesses than others ?
It's also possible over the intervening years the norm for startup companies is to be well-capitalized from the get-go and require #2 to keep going.
The amount of money US companies that need money get via initial or secondary public offerings is minuscule compared to other methods companies raise money (credit lines, bonds etc.) It has been that way since at least World War II.