Explainer
Direct Listing
Direct public offering on an exchange
A way to go public by listing existing shares, without raising new money.
In a direct listing, a company skips the traditional underwriting process. No new shares are created to sell to investors. Instead, existing shareholders, such as employees and early investors, can start selling their shares on the exchange.
Because there is no book of pre-arranged buyers, the opening price is set by supply and demand on the first morning of trading. Companies that do not need fresh capital sometimes prefer this route because it avoids underwriting fees.
The downside is less price support. Without underwriters allocating shares to long-term holders, early trading can be more volatile.
Illustrative explainers. Figures in examples are hypothetical.