Direct Public Offering - Explained
What is a Direct Public Offering?
Written by Jason Gordon
Updated at April 6th, 2023
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What is a direct public offering?
A direct public offering is the process by which a company offers its shares for sale directly to the public without employing the services of an underwriter. The underwriter has the ability to reach out to large institutional investors and guarantee the sale of a certain quantity of securities. In a direct public offering, the company will generally enlist the services of a broker to make certain the offering is carried out in accordance with the securities laws. The requirement to register securities still applies; however, the company may be able to employ an exemption from registration (discussed below). Once registration (or an exemption therefrom) is complete, the company will advertise the offering and begin selling to individuals, investment firms, etc. The direct public offering has become popular for companies seeking to crowdfund its growth. Numerous websites and services now exist to meet this demand.
Note: The direct public offering is generally employed by smaller firms who cannot attract an investment bank to underwrite the public offering. It is far cheaper than an IPO, particularly if the company is able to employ an exemption from the securities registration process.
Next Article: Crowdfunding & Securities Laws Back to: SECURITIES LAW
Discussion Question
Why do you think larger companies generally go through the IPO process, rather than undertaking a direct public offering? Can you see any advantages to the IPO over the DPO or vice versa?
Practice Question
How does the process of a direct public offering differ from that of an initial public offering? What are the advantages of the DPO process?
Related Topics
- Securities Law (Intro)
- What are Securities Laws?
- What is a Security?
- What qualifies as an Investment contract?
- What are the primary federal securities laws?
- What are the regulatory goals of security laws?
- What is the Securities and Exchange Commission?
- What is an Initial Public Offering?
- What is a Direct Public Offering?
- What is Crowdfunding?
- Securities Act of 1933
- What is an Offer to Sell securities?
- Who are the parties regulated in an offer to sell securities?
- What are the primary disclosure documents required in an offer to sell securities?
- Forward Looking
- Red Herring Prospectus (Securities) Definition
- Registration of Securities
- What is an issuer allowed to do at each stage of the registration process?
- How are issuers classified for purposes of the registration and offering process?
- What is an issuer allowed to do during the Pre-filing Period?
- What are the limitations on the issuer during the Post-filing, Waiting Period?
- What is an issuer allowed to do during the Post-Effective Period?
- What is an Emerging-Growth Company?
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- Deficiency Letter (Securities Law)
- Registration Exemptions Securities Act of 1933
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- What are Restricted Securities?
- Section 3(a)?
- Section 3(b)?
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- What is a Section 4(a) Exemption?
- Section 4(a)(5)?
- What is a Regulation A Exemption?
- What are Regulation D Exemptions?
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- What is a Rule 505 Exemption?
- What is a Rule 506(b) Exemption?
- What is a Rule 506(c) Exemption?
- What is Rule 502(d) and the Rule 144 Safe Harbor?
- Rule 144a
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- Liability Under the Securities and Exchange Act of 1933
- What is civil liability under Section 11 of the 33 Act?
- What is civil liability under Section 12 of the 33 Act?
- What are defenses available to charges under Sections 11 and 12?
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- What is potential criminal liability under the 33 Act?
- The Security Exchange Act of 1934
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- What is liability under Section 10(b) and Rule 10(b)(5)?
- What is insider trading under Rule 10(b)(5)?
- What damages are available under Section 10 and Rule 10(b)(5)?
- What is insider trading under Section 14 of the 34 Act?
- What is liability under Section 16 of the 34 Act?
- What is liability under Section 18 of the 34 Act?
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- Liability under the Securities Enforcement Remedies Act?
- Blue Sky Laws State Securities Laws
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- When is an issuer required to comply with state securities laws?
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