IPO vs. Direct Listing Which is Right For Your Business?

IPO vs. Direct Listing
Which is Right For Your Business?

PublicFinancial.com IPO Knowledge Hub Series

One of the biggest decisions founders face when going public is choosing the right path: a traditional IPO or a direct listing. Each has unique benefits and trade-offs.

What’s the Core Difference?

IPO (Initial Public Offering): The company issues new shares to raise capital. Investment banks underwrite the offering, help set the price, and market the shares to investors.
Direct Listing: No new shares are issued. Existing shareholders (founders, employees, early investors) sell their shares directly to the public. No underwriters set the price — the market does.

Key Founder Questions: IPO vs. Direct Listing

1️⃣ Which route is better for us?

Choose an IPO if:

You need to raise new capital.
You want underwriters to help manage pricing, marketing, and investor engagement.

Choose a Direct Listing if:

You don’t need new capital.
You want to minimize dilution and underwriting fees.

2️⃣ What are the biggest differences in cost?

IPO costs: Underwriter fees typically range from 6% to 10% of the capital raised, plus accounting, audit, legal, advisory and other expenses.
Direct listing costs: No underwriting fees, though you’ll still incur legal, accounting, and advisory expenses.

3️⃣ How does pricing work?

IPO: Underwriters gauge investor demand and propose a pricing range.
Direct Listing: The opening price is determined by the last private placement price or by market supply and demand.

4️⃣ What about liquidity for shareholders?

IPO: Insiders usually agree to a lock-up period (typically 180 days) during which they can’t sell shares.
Direct Listing: No lock-up period. Insiders can sell shares immediately (subject to various regulations), but large early sales can impact stock price volatility.

5️⃣ Can we switch from one method to another?

Sometimes. Once you’ve structured and begun regulatory filings for one path, switching would require meaningful changes.

If raising capital is essential, IPO is usually the better path. If getting public is the main goal and you don't need to raise more capital right away — a direct listing may provide lower costs and greater flexibility.

Next Step: Are You Ready for Either Path?

Choosing between an IPO and a direct listing depends on more than preference. Explore our IPO Readiness Assessment or contact PublicFinancial.com for a no-obligation consultation tailored to your company’s goals.