IPO VS Direct Listing - Finance 101

Initial public offerings and direct listings are two methods for firms to raise capital by listing their common stock on a public exchange. While many firms choose to do an initial public offering (IPO), in which new shares are created, underwritten, and sold to the public.

Some companies prefer a direct listing, in which no new shares are created, and only existing, outstanding shares are sold with no underwriters involved.

Companies that can't afford underwriting fees and expenses, don't want share dilution or are avoiding lockup periods often choose the direct listing process, a less expensive option than an IPO. Without an intermediary investment bank, however, there is no safety net ensuring the shares sell on the offering day.

#finance #IPO # investing #stocks
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