Direct Public Offering - Explained
What is a Direct Public Offering?
Written by Jason Gordon
Updated at September 25th, 2021
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
-
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
- Courses
Table of Contents
What is a direct public offering?Discussion QuestionPractice QuestionAcademic ResearchWhat 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
Understanding Securities Law
- 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?
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?
