A direct listing is a more streamlined and less costly way of going public than a traditional initial public offering. Despite that — and despite the fact that the process has some high-profile advocates in Silicon Valley and elsewhere — only two notable companies have done a direct listing in the US — Spotify in 2018 and Slack last year.
Here's a look at what a direct listing is, why Palantir might want to use the process to go public, and why it might be in a good position to do so.In a direct listing, a company's private owners sell shares directly to institutional and everyday investors through a public stock exchange. Just as in an IPO, a company going through a direct listing hires investment banks to help manage the process.
While such pops draw publicity and excitement, they also represent lost money for the company. When a stock pops on its first day of trading, the beneficiaries of that rise are the institutional investors who bought shares in the IPO — not the company that sold them the shares. And everyday investors have shown that they're more than willing to buy tech stocks, no matter how obscure the companies may be, Das said.
What's more, there's been an active secondary market in Palantir shares for years. As a result, investors already have a decent sense of what the company and its shares are worth. So there's no real need for an investment bank to try figure out a price.
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