Direct Listing

A company looking to raise interest-free capital from the public by listing its shares has two options—an IPO or a direct listing. … Direct listings are also known as Direct Placement or Direct Public Offerings. In this process, the company sells shares directly to the public without getting help from intermediaries.

Instead of an initial public offering, Spotify opted for a direct listing, meaning rather than issue new shares, the company started trading by letting existing shareholders sell their shares directly on the public market.

Specifically, Spotify wanted to: … Provide unfettered access to all buyers and sellers of its shares, allowing Spotify’s existing shareholders the ability to sell their shares immediately after listing at market prices. Conduct its listing process with maximum transparency and enable market-driven price discovery.

In a direct listing, you can only buy the stock after it’s listed. After the stock gets listed, you can place the order for the number of shares that you want. You can place a market order as well as a limit order.

Two notable companies that have gone public through direct listings are Spotify and Slack. Both companies already had strong reputations before going public. They were widely used, and it was easy to understand how the company makes money.

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