Direct listings attracted a fair amount of excitement back in 2019, which as you might recall was before meme-stocks and SPACs sucked all of the air out of the room. A recent Fenwick memo checks in on whether they’ve become the IPO alternative that some predicted. The answer: not at this time. Ran Ben-Tzur notes:
While direct listings continue to be an attractive option for certain companies, the ‘death’ of the traditional IPO that was predicted just a couple years ago has not materialized, with 2021 showing that IPOs still remain a much more popular way for companies to go public.
The memo explains that direct listings have stayed niche because they work best for companies that already have proven size, profitability and liquidity – and also because of the high standard that a company needs to be able to conduct a simultaneous capital raise.
It probably doesn’t help that the SEC also recently rejected Nasdaq’s proposal that would have allowed more flexibility for the pricing range in these deals. John had previously blogged about that proposal back in January.
– Liz Dunshee