Founder's guide
Direct public offering (DPO): how it works
What a direct public offering is, the legal routes and current limits, how a DPO differs from an IPO and a direct listing, what it costs, and when it fits.
A direct public offering, or DPO, is a company selling its own shares directly to the public without an investment bank. In the US it is done under Regulation A (up to $75 million a year under Tier 2), Regulation Crowdfunding (up to $5 million), Rule 504 (up to $10 million) or a self-underwritten registration. A DPO raises money, but unlike an IPO or a direct listing it does not by itself create a trading market for the shares.
Joel Arberman, Meraki Partners. Based on 17 companies taken public: 11 by direct listing, 4 by reverse merger and 2 by IPO.
How does a direct public offering work?
The company prepares an offering document, qualifies or registers the offering with the SEC under one of the routes below, and then markets the shares itself: to customers, community, employees and anyone else who can legally invest, often online through a funding portal or the company's own site. Investors buy directly from the company. There is no investment bank buying the shares and reselling them, so there is no underwriting discount, but there is also no bank finding the investors.
What are the legal routes for a DPO?
| Route | Maximum raise (12 months) | Who can invest | Key points |
|---|---|---|---|
| Regulation A, Tier 2 | $75 million | Anyone; non-accredited individuals are limited to 10% of the greater of income or net worth unless the shares are listed on an exchange | SEC qualification of an offering circular; audited financials; no state registration; ongoing annual, semiannual and current reports |
| Regulation A, Tier 1 | $20 million | Anyone | SEC qualification plus registration in each state where shares are sold; no ongoing SEC reports |
| Regulation Crowdfunding | $5 million | Anyone, with annual limits for non-accredited investors | Must go through a registered funding portal or broker-dealer; Form C; annual reports |
| Rule 504 of Regulation D | $10 million | Depends on state rules | Exempt from SEC registration but not from state law; used mainly for small local offerings |
| Self-underwritten S-1 | No cap | Anyone | Full SEC registration; the company becomes a reporting company; officers sell the shares without a commission |
Limits as of November 2026. The SEC and states adjust them from time to time, and each route has conditions not listed here.
Regulation A is the most common route for a sizable DPO, which is why "Reg A+" and "direct public offering" are often used together. We cover it in what is a Regulation A offering and on raising under Reg A+. Regulation Crowdfunding suits smaller raises; see raising under Reg CF.
What is the difference between a DPO and an IPO?
| Direct public offering | IPO | |
|---|---|---|
| Who sells the shares | The company, directly | An underwriter (investment bank) |
| Underwriting discount | None (funding portal or placement fees may apply) | 6% to 8% for smaller IPOs, plus expenses and warrants |
| Typical size | Under $1 million to tens of millions | Generally $15 million or more |
| Investors | Customers, community and the public, often many small investors | Mostly institutions and the bank's clients |
| Trading afterwards | Not automatic: shares may stay untraded unless the company also lists | Listed on Nasdaq or the NYSE from day one |
What is the difference between a DPO and a direct listing?
A DPO raises money by selling new shares to the public. A direct listing creates a public market for shares that existing shareholders already own, after the company has raised its money privately. They solve different problems, and a company can do both: raise money in a Reg A offering, then have the shares quoted on the OTC market or listed on an exchange.
Can shares sold in a DPO trade?
Sometimes, but not automatically, and this is the part many founders miss. Shares sold under Regulation A and in a registered offering are generally freely tradable, but they still need somewhere to trade: a market maker has to file Form 211 for an OTC quotation, or the company has to qualify for and list on an exchange. Shares sold under Regulation Crowdfunding generally cannot be resold for a year. Rule 504 shares are generally restricted securities. A DPO that raises money but leaves investors with no way to sell can make the next raise harder, so plan the trading path at the start. See how to go public on the OTC market.
What are the advantages of a DPO?
- No underwriter. No 6% to 8% discount, no bank deciding the price or who gets the shares.
- Customers become owners. Companies with a loyal following can turn customers into shareholders and advocates.
- Flexible size. From a few hundred thousand dollars under Reg CF to $75 million under Reg A Tier 2.
- Founder control of the terms. The company sets the price and the minimum investment.
What are the disadvantages of a DPO?
- The company has to find the investors. Marketing a DPO is real work and real money, often more than founders expect.
- Many small shareholders. Hundreds or thousands of investors to communicate with, and a cap table future investors will look at closely.
- No market unless you build one. Without a quotation or listing, investors cannot sell.
- Disclosure and ongoing reporting. Especially under Reg A Tier 2 and a registered offering.
- Broker-dealer rules still apply. Anyone paid a commission on the money raised must be a registered broker-dealer or a funding portal for Reg CF.
How much does a DPO cost?
It depends on the route and the marketing. Legal, audit and filing costs for a Reg A Tier 2 offering commonly run into the low hundreds of thousands of dollars before marketing, and many companies spend as much or more on marketing the offering as on the legal work. A Reg CF raise is cheaper to set up, with the funding portal charging a percentage of the money raised. Our clients usually find that a private placement followed by a direct listing costs less and gets them a trading market sooner, but a DPO can be the better choice for a consumer brand with a large, loyal customer base.
When does a DPO make sense?
When the company has a community that wants to own a piece of it, a story that sells without a bank behind it, and the time and budget to market the offering. Consumer brands, local businesses, cooperatives and mission-driven companies are the classic fit. For a business-to-business company that needs a liquid stock to make acquisitions and hire, a private raise followed by a direct listing is usually the faster path. Already done a Reg A or Reg CF raise? See what comes next after Reg A+ and after Reg CF.
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