Direct Listings

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As more companies are securing multiple rounds of private finance before coming to market, they don’t always need to raise capital at the point of listing. Many companies may be looking for a simpler and quicker route to a public listing.

At London Stock Exchange we offer companies a wide choice of routes to market, including Direct Listings – also known as introductions in the UK – that have been available in London for many years.

[Music playing in the background.] The demand for Direct Listings is growingThey have been a path to market in London for many yearsDirect Listings offer an alternative routewhere companies or their shareholders sell shares directly to the publicFor the right companya Direct Listing can offer a simpler and lower cost route to listingShare price is determined by the whole market on day onemeaning there is a wider audience of investors to set the valuation of the companywith reduced risk of mispricingas the price will move with board market demandHad multiple rounds of equity finance? Do not need to raise capital at IPO?A Direct Listing is an option for youAccess a broad spectrum of investorsminimal trading restrictions and lock-up periodsaccess the same global visibility and liquidity as any listed company on London Stock ExchangeThe demand for Direct Listings is growingand London is open[London Stock Exchange]

What is a Direct Listing?

In a Direct Listing, a company’s shares are admitted to trading on a public market. Compare this to a traditional IPO where admission to trading hinges on a successfully coordinated offer of new or existing shares to investors – managed by an underwriting bank that provides bookbuilding services. Often in an IPO, a bank markets the offer to institutional investors first and retail investors can participate after admission to trading.

When a company chooses a Direct Listing, it skips a bank’s bookbuilding process – and the opening auction on the exchange determines price discovery. In a simple Direct Listing, there are no set conditions about pricing securities or how many shares should be sold.

A company choosing a Direct Listing will need to be confident that there is sufficient demand among its existing shareholders to allow a liquid market to develop post-admission to trading. Public investors actually determine the security price on the day the company goes to market. Companies may still mandate banks for advisory services to help educate investors on the companies equity story.

Benefits of Direct Listing

A Direct Listing can be a simpler and more cost-effective route to market for some companies. Companies that do not need to raise capital at listing may choose this route as it is an easy way of allowing the market to value your company.

  • Low risk of mispricing as the price will move with supply and demand and is set by the whole market
  • A company can access a broad spectrum of investors without lock-up periods and restrictions on trading
  • Direct Listings provide equal access for all investors
  • The opportunity to access a lower cost route to market
  • Greater certainty of completing a listing due to not needing to conduct the book building process
  • The listing offers all of the usual benefits of a London listing including global visibility and access to liquidity

How does life as a listed company change with a Direct Listing in London?

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All listed companies on London Stock Exchange have access to the same global visibility, profile and liquidity regardless of their route to market. London remains Europe’s most active stock exchange in terms of the value and volume of equity transactions. The depth and breadth of our market provides access to companies of any size, headquartered around the world with the opportunity to grow and expand for the future.

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Interested in a Direct Listing or want to learn more? Contact our experts.

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