Hi everyone, thanks for watching this video! My name is Jackson Welch; I make videos on technology and personal finance. Hit the subscribe button to be notified whenever I make a future video.

In this video I discuss the primary differences between an IPO, SPAC and Direct Listing.

In a regular IPO, bankers go on a roadshow with company executives, meeting with investors in different cities to drum up interest in the deal. At the end of the process, bankers set the initial offering price for the shares. They typically set the price a little below what the market will bear. If everything works as hoped, this ensures the shares jump on the first day of trading, handing the banks’ investor customers a quick return. That’s nice for banks and their institutional investor clients (who have taken some risk by buying shares in the IPO), but the money comes out of the pocket of the issuing company’s founders and other early investors.

“Blank check” companies are another alternative to traditional IPOs. These deals—technically known as special purpose acquisition companies, or SPACs—kind of work in reverse. A SPAC raises money through an IPO and then goes out and finds an acquisition target. Similar to a direct listing, a SPAC doesn’t have a roadshow.

Direct listings are an attractive alternative for some issuers. There’s no roadshow, the fees are lower, and the offering price gets set on an exchange, not by investment bankers. Spotify, the streaming music service, pioneered direct listings in 2018, and messaging service Slack followed in 2019, with Goldman Sachs playing a key role in both deals. Despite the buzz around this kind of fundraising, there hasn’t been a direct listing in more than a year—but that’s likely to change soon. In addition to Palantir, the corporate-software maker Asana is planning a direct listing, and plans to join Spotify and Slack on the New York Stock Exchange.

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This video is only for entertainment purposes. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is designed to be accurate at the time of filming, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video. If you choose to follow any actions in this video you do so at your own risk. Thank you for understanding.


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