Banks rip off companies in IPOs by underpricing the stock so their investors get a kickback.
That's the least charitable way to write it, but it's somewhat close to the truth (the other part of the truth is that pricing is hard which is why we have markets).
DPOs allow companies to list at a reference price without losing out on money - they can sell at the true price later.
Banks naturally make up a bunch of reasons why this is bad, but it's mostly nonsense.
When one side does many of these types of transactions per year (banks) and one side may only do one or two in a lifetime (founders) expect the side with more experience to both tilt the deal in their favor and to have a compelling narrative of why it's actually better for you.
There's a funny story (I searched briefly, but couldn't find) that when Elon took Tesla public via an IPO and the bankers told him the initial price he just said "no, at least $XX or no deal". I think the bank price was $17 and he said at least $19, but I could be off on the numbers. They did his price and that price was still too low.
It's a mistake for any company to IPO from now on imo, SPACs are even worse really (unless you're running a fraud in which case SPACs are great).
There are a number of important differences, in fact the only meaningful comparison is that they are selling shares to the public.
The title is wrong, there is no IPO. Presumably "IPO" is meant as "public offering." If there's a place to be specific about these things, isn't this thread it?
I don't know much about finance but based on what GP said, the biggest difference (aside from the acronym) is that one is a fund-raising event and the other is a liquidation event for shareholders. I read the latter as Coinbase's investors said at a board meeting, "Ok, we're ready to cash out now." so they held the DPO.
Kinda. In a normal IPO the big banks will agree to underwrite (that is, buy from the company and then immediately sell to investors) all the shares at an initial "offering price", and this is agreed upon in writing a little bit before the launch day. I don't believe this happens in the direct listing format, it just starts floating with no underwriting process.
So there is a difference in structure, but to your point immediately after launch it does not really matter to the general investing public
In an IPO the company puts private shares in the open market and gets money from it, priced at the IPO price. Whoever has (private) shares now has public shares and can trade whenever they want.
In a Direct Listing the company often already traded shares "openly" but not in a "public" way, but now wants it listed publicly so retail investors can trade it, and there's no immediate need of capital so the objective isn't to get a funding from offering shares in an IPO.
gonehome|4 years ago
That's the least charitable way to write it, but it's somewhat close to the truth (the other part of the truth is that pricing is hard which is why we have markets).
DPOs allow companies to list at a reference price without losing out on money - they can sell at the true price later.
Banks naturally make up a bunch of reasons why this is bad, but it's mostly nonsense.
When one side does many of these types of transactions per year (banks) and one side may only do one or two in a lifetime (founders) expect the side with more experience to both tilt the deal in their favor and to have a compelling narrative of why it's actually better for you.
See: https://podcasts.apple.com/us/podcast/bill-gurley-direct-lis...
There's a funny story (I searched briefly, but couldn't find) that when Elon took Tesla public via an IPO and the bankers told him the initial price he just said "no, at least $XX or no deal". I think the bank price was $17 and he said at least $19, but I could be off on the numbers. They did his price and that price was still too low.
It's a mistake for any company to IPO from now on imo, SPACs are even worse really (unless you're running a fraud in which case SPACs are great).
u678u|4 years ago
RaketenStadt|4 years ago
The title is wrong, there is no IPO. Presumably "IPO" is meant as "public offering." If there's a place to be specific about these things, isn't this thread it?
Zelphyr|4 years ago
ttt333|4 years ago
So there is a difference in structure, but to your point immediately after launch it does not really matter to the general investing public
fernandopj|4 years ago
In an IPO the company puts private shares in the open market and gets money from it, priced at the IPO price. Whoever has (private) shares now has public shares and can trade whenever they want.
In a Direct Listing the company often already traded shares "openly" but not in a "public" way, but now wants it listed publicly so retail investors can trade it, and there's no immediate need of capital so the objective isn't to get a funding from offering shares in an IPO.