What is a direct listing?

A direct listing is a way to go public without an underwriter. Instead of selling new shares through an investment bank, the company registers its existing shareholders' shares with the SEC and they begin trading, usually on the OTC market at first. For a smaller company, the money is typically raised privately before the listing, which keeps the cost to about $300,000 to $500,000 and avoids both the $15 million minimum of most IPOs and the shell company risks of a reverse merger.

Joel Arberman, Meraki Partners. Based on 17 companies taken public: 11 by direct listing, 4 by reverse merger and 2 by IPO.

How does a direct listing work?

For the small and mid-sized companies we work with, a direct listing runs in a set order over about ten months:

1. Prepare the company. Convert to a corporation if needed, clean up the cap table, and engage a PCAOB-registered auditor for the financial statements the SEC requires.
2. Raise money privately. The company sells shares to investors in a private placement, usually under Regulation D. These investors become the shareholders whose shares will be registered, and their price becomes the reference point for the first trade.
3. Register the shares with the SEC. The company files a registration statement, usually a Form S-1 for the resale of the investors' shares, sometimes with a Form 10. The SEC reviews it, comments, and the company responds until it is declared effective.
4. Get quoted. A market maker files Form 211 with FINRA so the shares can be quoted, the shares are made DTC eligible so brokers can settle trades electronically, and the company receives its ticker symbol, usually on the OTCQB market.
5. Trade, report and grow. The shares begin trading, the company files annual, quarterly and current reports with the SEC, and it can later uplist to Nasdaq or NYSE American once it meets their standards.

The full sequence is in how to take your company public, and the OTC step is covered in detail in how to go public on the OTC market.

What is the difference between a direct listing and an IPO?

What is the difference between a direct listing and a direct public offering?

In a direct listing, the company registers shares that existing shareholders already own so they can trade; the company raised its money privately beforehand. In a direct public offering, the company sells new shares directly to the public, without an underwriter, usually under Regulation A or Regulation Crowdfunding. A DPO raises money from the public; a direct listing creates a public market. The two can be combined.

What is a primary direct listing?

On the New York Stock Exchange and Nasdaq, a traditional direct listing only lets existing shareholders sell; the company raises nothing at listing. Since 2020 the NYSE, and since 2021 Nasdaq, have also allowed a primary direct listing, in which the company itself sells new shares in the opening auction. There is no traditional underwritten offering, although the exchanges still require the company to name an underwriter of record, and the opening price can land from 20% below to 80% above the price range in the registration statement. These are rare and suit companies large enough to meet the exchange's market value standards on day one. We explain when one makes sense in primary direct listing vs a traditional IPO.

Who sets the price in a direct listing?

The market does. On an exchange, the opening price comes from an auction that matches buy and sell orders, run by the NYSE's designated market maker or by Nasdaq's opening cross, in consultation with the company's named financial adviser or underwriter. On the OTC market, the first trades are between buyers and sellers through market makers, and the price the private placement investors paid is usually the anchor. See who sets the share price in a direct listing.

What are the advantages of a direct listing?

• Lower cost. No underwriting discount, and typically $300,000 to $500,000 all in, much of which can be paid from the private raise.
• No minimum offering size. A company can go public with a private raise of $500,000 to $2 million rather than the $15 million or more most IPOs need.
• No shell. Unlike a reverse merger, there is no shell history to inherit, no Rule 144(i) resale restriction and no exchange seasoning period.
• Less market-timing risk. The money is raised privately first, so the listing does not depend on an underwriter selling shares in a particular week.
• Founder control. The company chooses its investors, its price in the private round and its own lock-up terms.

What are the disadvantages of a direct listing?

• It takes longer. About ten months, because the SEC reviews the registration before trading starts.
• No bank selling the stock. The company and its advisers have to find the private investors and, later, build interest in the stock themselves.
• Thin trading at first. Most direct listings start on the OTC market with modest volume until the company grows, adds shareholders and uplists.
• Price discovery is real. With no underwriter supporting the stock, the early price can move more than after an IPO.

How much does a direct listing cost?

Typically $300,000 to $500,000 as of November 2026, covering the audit, securities counsel, the transfer agent, filing and quotation costs and our own fee, with no underwriting discount. The breakdown is in how much a direct listing costs.

Which companies are a good fit for a direct listing?

Profitable or fast-growing private companies that want the tools of a public company (stock to make acquisitions and hire with, credibility, access to capital) but are too small for an underwritten IPO and do not want a shell. There is no minimum revenue; the practical test is money, because the company has to earn or raise enough to cover the listing and roughly $300,000 to $500,000 a year of public company costs. See how big a company needs to be to go public. 11 of the 17 companies we have taken public used a direct listing. See our direct listing service or take the path to public quiz.

Can a direct listing company move to Nasdaq later?

Yes. Many companies start on OTCQB and uplist to the Nasdaq Capital Market or NYSE American once they meet the exchange's standards for price, shareholders, public float and equity, often in connection with a public offering. Note that since April 2025, when an OTC company uplists to Nasdaq together with a public offering, the minimum public float value generally has to come from the new offering itself, unless the stock has already traded actively on the OTC market, so the size of that offering matters. See Nasdaq listing requirements explained and how to uplist from the OTC market.

Related questions

• How much does a direct listing cost?
• When does a primary direct listing make sense vs a traditional IPO?
• Who sets the share price in a direct listing?
• Reverse merger vs IPO: pros, cons and which fits
• Direct public offering (DPO): how it works

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