A direct listing is the process by which a company lists shares held by its existing stockholders for sale on a public exchange. Unlike an IPO, where the company will typically raise capital by selling securities, in a direct listing no capital is raised by the company. Instead, the company registers the stock held by its existing stockholders, and those stockholders may sell their shares when the price is right for them. Just like with an IPO, companies undergoing a direct listing will need to comply with the registration requirements of the 1933 Act (pdf) as well as the public reporting requirements of the 1934 Act (pdf). In a direct listing, the company will file an S-1 Registration Statement, which includes a prospectus on the company and other detailed disclosures.
Once the S-1 is filed, the SEC makes comments that require revisions to the form, and the back and forth typically takes ten to twelve weeks before the securities can be publicly listed.
Unlike an IPO, in a direct listing, a company does not engage banks as underwriters to price securities and ultimately distribute them. Banks are involved as “financial advisors” to assist with messaging in the S-1 and other activities. In addition, the company can only engage in very limited marketing efforts for the securities to potential investors.