Source - https://a16z.com/2019/07/02/direct-listings/
TL;DR - Direct listings are positioned to become a popular alternative to IPOs.
Helpfulness - 4 (maybe better for Chapter 7)
Tags - direct listing, public market, IPO, Investor Day, roadshow
Questions answered:
- What is a direct listing?
- How does a direct listing differ from an IPO?
Summary:
- Direct listings are an emerging trend among tech startups as an alternative route to public markets.
- In a direct listing, no shares are sold and no capital is raised.
- Instead of the typical pre-IPO roadshow, direct listings have an Investor Day (operates like a one-to-many presentation).
- Companies doing a direct listing provide investors with forward guidance.
- Because of the lack of 180-day lockup period, early trading of direct listed companies results in a more accurate indication of supply and demand (equilibrium price) because of more volume.
- In a direct listing, all investors enter at the market-clearing price.
- With an abundance of capital in the private markets, companies no longer rely on public markets for capital.
- IPOs cause unnecessary dilution (discounted pricing).
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