Direct Listing.

In plain English

A direct listing is a way for a company to go public by letting its existing shares (held by founders, employees, and early investors) trade on a stock exchange. Unlike a traditional IPO (initial public offering), the company does not create and sell brand-new shares to raise cash, and it does not hire investment banks to set a price and find buyers. Instead, the opening price is set by buyers and sellers on the first trading day. Spotify and Slack are two well-known companies that went public this way. It saves the company on banking fees, but it raises no new money for the business.

01Why it matters

If you want to buy a newly public company, knowing it came through a direct listing tells you the price was set by the open market on day one, not negotiated in advance, so early swings can be sharp.

02The math, step by step

A software company has 100 million existing shares held by its founders and staff. Instead of a traditional IPO, it does a direct listing. On the first day, regular buyers and sellers push the opening price to around $40 a share. No new shares are created, so the company itself gets none of that money. The early shareholders who choose to sell are the ones who get paid.

03What this is NOT

04Receipts

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