Direct Public Offering (DPO), also known as Direct Placement or direct listing, is a way for companies to become publicly traded without an investment bank backed Initial Public Offering (IPO). In a direct listing, no new shares are created and only existing outstanding shares are sold with no underwriters involved.
Companies that can’t afford underwriting, don’t want share dilution, or are avoiding lockup periods often choose the direct listing process, Direct Public Offering. It is less expensive option than an IPO.
In Direct Public Offering, the companies sell shares to the public without getting help from intermediaries.
The existing investors, promoters and employees holding shares of the company can directly sell their shares to the public.
Some recent companies that have gone public via Direct Public Offering are listed below.
- Spotify Technology S.A. (NYSE: SPOT)
- Slack Technologies, Inc (NYSE: WORK)
- Palantir Technologies, Inc (NYSE: PLTR)
Investors should do research and understand the risks and opportunities before investing on Direct Public Offering companies, similar risks of IPO companies. Some market watchers believe that Direct Public Offering will become more common in the future, especially among the tech companies.