DECODING DIRECT LISTINGS VS. TRADITIONAL IPO’S: AN ANALYSIS

AUTHOR – SAHIL BORA, STUDENT AT GOVERNMENT LAW COLLEGE, MUMBAI

BEST CITATION – SAHIL BORA, DECODING DIRECT LISTINGS VS. TRADITIONAL IPO’S: AN ANALYSIS, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 4 (2) OF 2024, PG. 595-605, APIS – 3920 – 0001 & ISSN – 2583-2344.

ABSTRACT:

This comprehensive article provides a detailed exploration of the two primary methods, companies employ to go public: traditional Initial Public Offerings (IPOs) and the more recent approach of Direct Listings. With an in-depth analysis of both paths, the article sheds light on their respective advantages, challenges, and considerations. Traditional IPOs involve partnering with investment banks to underwrite new shares, facilitating substantial capital infusion, and enhancing credibility. However, the process is characterized by high costs, potential under-pricing, and lock-up periods. On the other hand, direct listings offer efficiency and transparency, bypassing underwriting fees and enabling immediate liquidity for existing shareholders. Yet, they lack the capital generation of traditional IPOs and may experience market volatility. Factors influencing the choice between these paths include a company’s capital needs, visibility goals, and employee incentives. By meticulously weighing the pros and cons of each approach, companies can strategically decide on the path that best aligns with their unique circumstances and objectives, marking a pivotal step in their journey toward public markets

KEYWORDS: Securities and Exchange Commission (SEC), Initial Public Offer (IPO), Direct Listings, Issue of Capital and Disclosure Requirements (ICDR), Draft Red Herring Prospectus (DRHP)