Direct Listings

About Direct Listings

Direct listings allow companies to go public without using investment banks as underwriters. Existing shareholders sell shares directly to the public. Spotify was the first major company to use a direct listing in 2018. Slack followed in 2019. Coinbase used a direct listing in 2021. Direct listings avoid underwriting fees and lockup periods. However, they do not raise new capital for the company. The NYSE and SEC approved rules allowing primary capital raising through direct listings in 2020, making them a more complete alternative to IPOs. Direct listings challenge the traditional IPO model, which critics argue underprices shares to benefit underwriters and their preferred clients.