This video will teach you everything you need to know about the direct listing.
#directlisting #ipo #wallstreetmojo #stockmarket #capitalraising
Chapters:
00:00 – Introduction
00:29– What is direct listing?
01:15 – Some examples of direct listing
02:03 – Benefits of direct listing
03:08 – Direct listing vs. IPO
04:43 – Conclusion
(Explained in detail in the video)
What is direct listing?
Companies having IPOs need to go through lots of procedures and compliances.
The company can bypass all this and offer its shares to the public directly, and they can do that through a direct listing.
(Explained in detail in the video)
Some examples of direct listing
In 2019, Slack completed a direct listing on the New York Stock Exchange. The stock had opened at $38.50 from a reference price of $26.
In 2018, Spotify, the streaming giant, used the direct listing strategy to raise capital. The stock had opened at $165.90 from a reference price of $132.
Benefits of direct listing
The primary benefit of the direct listing method is that companies can bypass mediators, which also allows them to avoid paying various costs associated with IPOs and fundraising.
(Explained in detail in the video)
The company can set the price and period of the offering, minimum investment, total shares that investors can buy, and the settlement date.
Another benefit of a direct listing is that companies don’t have to undersell their shares which they would’ve had to do in an IPO.
Lastly, the company doesn’t have to create new shares and can list the existing shares in the direct listing.
(Explained in detail in the video)
Direct listing vs. IPO
(Check out the comparison table in the video)
The objective of direct listing and IPO is the same: raising capital. The difference may lie in how the companies raise capital, i.e., by offering existing shares or by creating new shares and offering those to the general public.
(Explained in detail in the video)
In the direct listing, there is no intermediary, while in an IPO, there are a couple of intermediaries.
The absence of any lock-in period in a direct listing is one more advantage.
With affordability, a direct listing makes it cost-effective for companies to raise capital, while an IPO might cost them a lot.
(Explained in detail in the video)
In a direct listing, the availability of shares depends on the employees and investors. In contrast, in an IPO, the shares may be readily available as the company creates new shares for the listing.
You might know that in an IPO, you can book or subscribe to the shares for yourself that would be allotted or given to you later on. But in a direct listing, you can buy the shares only after the company has listed them on the stock exchange.
(Explained in detail in the video)
Finally, a direct listing might result in more liquidity and volatility for the shareholders, while an IPO may have less liquidity and volatility.
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Direct listing: Easy explanation.
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