SPAC v. Direct Listing v. IPO?

Posted on July 26, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

What’s the difference between an IPO, a special purpose acquisition company (SPAC), and a direct listing?

[By staff reporters]

IPOs are a 6–12 month journey where a company works with investment banks and underwriters, who buy a bunch of shares and then sell them to investors in the public market during the actual IPO. Early investors are able to liquidate their shares, and the company raises new funds.

Direct listings skip the underwriting hullabaloo. But without that stability guarantee, direct listings can result in a more volatile opening. Some companies, like Coinbase, find that it’s worth it to keep their hard-earned money out of bankers’ hands.

SPACs, aka “blank-check companies,” offer yet another alternative path to public markets. A SPAC is a shell company that raises money through the traditional IPO process, then merges with a private company and takes it public. 

MORE: https://medicalexecutivepost.com/2019/06/24/what-is-a-direct-listing-process-on-wall-street/

***

Your thoughts are appreciated.

THANK YOU

***

Filed under: "Ask-an-Advisor", Accounting, Financial Planning, Funding Basics, Investing | Tagged: , , , , | 12 Comments »

What is the “Direct Listing” Process on Wall Street?

Posted on February 17, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

On The “Direct Listing” Process

[By staff reporters]

***

Direct Listings Once Looked Like a Threat to Traditional IPOs. Now They're an Option for the Few. | Barron's

***

We’ve talked about Wall Street, IPOs, the OTC market and secondary public offerings before. So, now may be a good time to discuss the direct public listing.

The Direct Public Listing

Companies that want to do a public listing may not have the resources to pay underwriters, may not want to dilute existing shares by creating new ones or may want to avoid lockup agreements. Companies with these concerns often choose to proceed by using the “direct listing” process, rather than an IPO.

Direct Listing Process (DLP) is also known as Direct Placement or Direct Public Offering (DPO)

In DLP, the business sells shares directly to the public without the help of any intermediaries. It does not involve any underwriters or other intermediaries, there are no new shares issued and there is no lockup period.

The existing investors, promoters and even employees holding shares of the company can directly sell their shares to the public.

***

***

However, the zero- to low-cost advantage also comes with certain risks for the company, which also trickle down to investors.

For example there is no support or guarantee for the share sale, no promotions, no safe long-term investors, no possibility of options like greenshoe and no defense by large shareholders against any volatility in the share price during and after the share listing.

Assessment:

The greenshoe option is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than originally planned by the issuer if the demand proves particularly strong.

MORE: https://money.usnews.com/investing/stock-market-news/articles/direct-listing-vs-ipo

Conclusion: Your thoughts are appreciated.

***

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

***

Filed under: Investing | Tagged: , , , , , , | 1 Comment »