Direct Listing
Going public by listing existing shares directly on an exchange without raising new capital.
Definition
A direct listing (or direct floor listing) is an alternative to a traditional IPO where a company's existing shares are listed directly on a stock exchange without issuing new shares or using underwriters. There is no traditional IPO price, no underwriter allocation, and typically no lock-up period. The share price is set by market supply and demand on the first day of trading. Companies like Spotify and Slack used direct listings.
Why it matters
Direct listings can be better for employees because there is often no lock-up period, meaning you can sell shares on the first day of trading. However, the lack of an underwriter means more price volatility on the first day.
Example
A company does a direct listing. On day one, shares open at $50 but range between $40 and $65. Employees can sell immediately (no lock-up). An employee sells 5,000 shares at $55, receiving $275,000 before taxes.