What is Direct Listing?
For the evolving business environment of today where companies need to adapt to the altering demands of customers, human resources and the market, listing on the Stock Exchange is the right way forward for such companies. In a new offering introduced by Pakistan’s capital market, companies can now list on the Stock Exchange without going through an IPO. This is called Direct Listing.
Who should opt for Direct Listing?
Direct Listing is for those companies who wish to list and divest the stake of their existing shareholders rather than raise additional capital. Companies with a paid-up capital of not less than Rs 200 million can avail the opportunity of Direct Listing.
Companies that want to avoid underwriters and Lock-In periods for their listing process can make use of Direct Listing. Moreover, Direct Listing is an ideal platform for those companies that are consumer-facing with a strong brand identity, have easy to understand business model, and do not require substantial additional capital.
Difference Between an IPO and Direct Listing?
When a company decides to list on the Stock Exchange, one of the reasons for it may be that investors want to partially cash out. While both an IPO and Direct Listing provide this option, however, in an IPO, hiring a Consultant-To-the-Issue (CTI) and other third parties is mandatory. This is optional in Direct Listing. Also, an IPO has a Lock-in period of 2 years, while Direct Listing has no Lock-in period restrictions, making Direct Listing efficient and accessible. Furthermore, Direct Listing provides companies with access to liquidity in the capital market without raising capital.