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That's more or less how a direct listing works. Historically direct listings have been rare, but recently Spotify and Slack have successfully done it. The main
by necubi 6y ago
That's more or less how a direct listing works. Historically direct listings have been rare, but recently Spotify and Slack have successfully done it.
The main downsides (aside from it just being unusual and therefore a bit risky) is that for regulatory reasons the company can't sell new shares this way, so it's just a means to go public and doesn't raise any money.
However, once the company is public (and has an established price) nothing is stopping them from doing a secondary offering.
- WrtCdEvrydy 6y ago> regulatory reasons the company can't sell new shares this way So can only direct list for a followup, not for an initial? I'd love to issue 1 million shares and just sell them to the pending buy orders on a market.
- chii 6y agoit'd be easy for the company to commit fraud by doing this. That's why it's disallowed. An IPO which is underwritten by sophisticated investors will be assumed to have done due diligence and thus, less likely to be an act of defraud. Hertz tried to sell more shares during their bankruptcy, and needed to ask the SEC for permission (to which the SEC is pretty much denied it).
- hamandcheese 6y ago> is that for regulatory reasons the company can't sell new shares this way, so it's just a means to go public and doesn't raise any money. Doesn't the company own shares? I've always assumed that when I get paid stock options or RSUs, they are transferred from "the company". So I would assume that a company could sell shares as part of a direct listing in order to raise money? Otherwise why direct list?