A direct listing allows companies to list on Nasdaq without concurrently raising capital. Typically, a company will list securities on a national securities exchange to provide restricted liquidity to existing shareholders and to raise capital via an Initial Public Offering (IPO). A direct listing, however, provides unrestricted liquidity to existing shareholders and the company does not concurrently issue securities to public investors to raise capital.
What is the difference between an IPO and direct listing?
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.
Jack Cassel, VP of New Listings and Capital Markets at Nasdaq, explains how a direct listing is one alternative path to the public markets. Read the article here.
Direct Listings with Capital Raise – Nasdaq Filing
The SEC recently approved Nasdaq’s rule filing to permit a company to conduct a direct listing on our market in connection with a primary capital raise. View the Approval Order here. Our latest proposal to the SEC would improve this process by modifying the existing limitation that the auction occur within a pre-determined price range. If approved, the rule filing would allow a company to sell shares in the opening auction outside of the range in their registration statement, but not more than 20% below the range. Nasdaq has had extensive conversations with potential issuers and the capital markets ecosystem about this proposal, and we look forward to working with the SEC and broader ecosystem on these enhancements. View the proposed rule filing here.
Who are Nasdaq Market Makers?
When companies list on Nasdaq, there are registered Market Makers who are actively trading and providing liquidity to buyers and sellers to reflect the current market conditions.
“We believe in transparency and efficiency. To be truly efficient, we have modernized the process by leveraging technology and taking the middle-man out of the equation.” — Jay Heller, VP, Head of Capital Markets