IFLR Quotes Harry Keegan on Direct Listings vs. IPOs

Akin Gump corporate partner Harry Keegan has been quoted in the IFLR article “PRIMER: direct listings,” a look at the difference between direct listings and more traditional initial public offerings (IPOs).

The article reports that a direct listing is when a company decides to offer its shares for sale to an investor without doing a public raise. There are, for example, no underwritten offerings or investor roadshows. In addition to reducing complexity and volatility, the article says the direct listing process can add speed and certainty, which the IPO process doesn’t have.

Keegan agreed, noting, “For a direct listing, as long as you’re eligible and your document is approved, then you will list—so there’s that certainty. Lack of certainty in IPOs is quite a big issue and a major reason for the SPAC [special purpose acquisition company] boom.” In addition, he said, direct listings “don’t need to involve marketing or a sale at the time of the IPO, which shortens the process.”

There are, however, some downsides to the direct listing approach, Keegan pointed out. “With a conventional IPO,” he said, “the banks will set a price range and, even if you end up pricing at the bottom or a bit below, you still have a good indication people will value the company at a certain level. But with a direct listing you may not know until you’re on the market.”

As for the type of companies that would look to do a direct listing, Keegan said he can see why those with “a huge public following already” would do it. “They don’t need the help of investment banks to market their shares and the direct listing generates them even more publicity.”