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Lesson 2 of 8 · 13 min
Routes to public equity: IPOs, SPACs, direct listings and follow-ons
Companies reach the public equity market through an IPO, a SPAC, a direct listing or a back door listing, and later sell more shares in follow-on offerings that are dilutive when the shares are new and non-dilutive when existing owners sell.
In short
- Primary issuance usually turns private ownership into public ownership: a growing firm outgrowing founder and venture money, a spin-off, a firm returning to the market after private owners restructured it, or a government privatization.
- An IPO takes months: regulators are briefed, a confidential prospectus is filed and approved, analysts publish, management markets the company, then a price range is set and book building starts.
- A SPAC is a shell that raises cash in an IPO, parks it in a trust, and must complete a shareholder-approved acquisition (de-SPAC) within a set period, usually two years, or return the money.
- A direct listing lists existing shares with no underwriter at a market-determined price; a back door listing is a private firm acquiring a listed company to use its listing.
- A seasoned (follow-on) offering is dilutive (primary) when the company sells new shares and non-dilutive (secondary) when existing private holders sell their shares.
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