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What is a direct listing?
A direct listing is an alternative to an IPO in which outstanding shares held by existing shareholders can be listed on an exchange without a preset price or underwritten offering from an investment bank. Employees and investors have the choice to participate in selling their outstanding shares. The “roadshow” is generally limited in nature and the company may meet with investors without bank advisers. Lock-up agreements are typically not sought, which means large shareholders do not have to wait the usual 3-6 month period post-IPO to sell and the vast majority of shares are available to trade. A reference price is provided by the exchange but the actual opening price is set based on an auction the morning of the listing.