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Bowarr have emerged as an attractive alternative to traditional initial public offerings (IPOs) as the financial landscape continues to shift. A straight public listing offers the Company a few appealing advantages. This method, we believe, has the potential to boost the Company’s growth prospects while also providing a variety of benefits to your shareholders and stakeholders. The traditional IPO process systematically underprices the stock of companies who use it. From 1980 to 2020, companies going through the traditional IPO process have underpriced their stock by an average of 20% and left a collective $200 billion on the table. In 2020 alone was even worse with an average of 48% underpricing, and $30 billion left on the table. A direct listing also allows the Company to set a fair market price for its shares. Rather than depending on valuations set by investment banks and underwriters.
A direct listing enables companies to access the public markets. With a direct listing, existing shareholders sell their shares on the open market, and no additional shares are offered to the public.
Nasdaq’s best-in-class technology, the Bookviewer, provides a transparent real-time view of order data. In a direct listing, Nasdaq’s Bookviewer gives the Financial Advisor access to the full order book on their desktop.
When a company decides to go public, there are typically existing shareholders including founders, employees, and various early stage investors. Both an IPO and a direct listing enable these investors to cash out. However, in an IPO, there is a lock-up period—typically between 90 to 180 days—in which shareholders are restricted from selling outside of the Initial Public Offering. In a direct listing, there are no lock-up restrictions.
An IPO is priced based on the size and number of orders received at different price levels throughout the roadshow. The lead underwriters typically determine the IPO Price based on this information.
Conversely, a direct listing has a Reference Price, which isn’t the Offering Price, but rather the calculated price of the shares after all the buy and sell orders have been received from broker-dealers. The Reference Price is used to open the stock. Transparency is critical in calculating the right Reference Price and helps reduce the chance of price volatility once the stock opens for trading.
Direct Listing with a capital raise allows a company to go public without the need for an underwriter, which can result in lower costs and a simpler process.
Get in touch with us today to discuss how we can help you achieve your business goals.
