Direct Listing

A direct listing (also called a direct floor listing or DPO—direct public offering) allows a company to list its shares on a stock exchange without issuing new shares or using underwriters to set a price. Instead, existing shareholders—employees, early investors, venture capitalists—sell their shares directly to the public on the first day of trading. The opening price is determined by supply and demand through the exchange's auction process. Direct listings avoid underwriter fees (typically 3-7% of proceeds in a traditional IPO) and prevent dilution since no new shares are created. However, companies forgo the price stabilization and guaranteed capital raise that underwriters provide. The SEC approved primary direct listings on the NYSE in 2020, allowing companies to raise capital through the process. Notable direct listings include Spotify (2018), Slack (2019), Coinbase (2021), and Roblox (2021).