What is a direct listing?
A direct listing is an alternative to an IPO that offers greater liquidity and flexibility to founders, early investors, employees, and other shareholders. A private company’s outstanding shares are listed on a stock exchange such as the NYSE or Nasdaq, without a primary or secondary underwritten offering. The company does not raise capital through the listing. Existing shareholders, such as employees and early-stage investors, are free to sell their shares on the exchange.
Why choose a direct listing?
A direct listing offers certain advantages to companies looking to go public. In particular, a direct listing is well-suited for companies who have:
- No immediate need to raise capital
- A large existing shareholder base
Compared to traditional IPOs, advantages include:
- Pure market-driven price discovery
- Greater liquidity for existing shareholders — no lock-up agreements
- Equal access to information for all buyers and sellers
Latham’s top-ranked capital markets lawyers worked with regulators to pioneer the first direct listings and continue to lead the developing direct listing market.