If you're figuring out how to take your company public, an IPO or initial public offering might seem like a good option for your business. However, an IPO isn't the only way to list your company on the stock market.
There are three alternatives to initial public offerings:
* Direct listing: A cheaper IPO alternative with minimal to no underwriting fees, no dilution, and no lockup period. Drawbacks include no support from underwriters, no volatility stabilization, and an inability to raise new capital.
* SPAC (Special Purpose Acquisition Company): This is essentially a company created by sponsors or investors to find another company to buy. The process involves the SPAC going public first, then purchasing a private company which enables the private company to go public. This method of going public is much faster than an IPO, which can be 3-6 months. However, SPACs can be highly complicated to navigate due to the multiple steps and parties involved.
* Reverse merger or reverse takeover: A pre-existing public company merges with or is acquired by a private company. This allows the private company to become public. Reverse mergers are similar to SPACs in that it can be cheaper and faster than a traditional IPO. However, the SEC limits the number of these types of public companies in the market.
If you're wanting to learn more about IPOs, check out our part 1 video, How to Launch an IPO - Initial Public Offering Explained: • How to Launch an IPO -...
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