Direct Public Offerings

A direct public offering (DPO) or direct listing is a method by which a corporation can offer an investment opportunity directly to the public. DPOs do not require registration with the Securities and Exchange Commission (SEC) since they qualify for an exemption from the federal registration requirements. The most used exemptions are for intrastate offerings, offerings under $1 million (the Rule 504 exemption), and Regulation A. In such cases, state level registration is generally required. 

DPOs can be marketed via internet advertising and advertising direct to consumers. Direct public offerings are opportunities for corporations who want to raise capital directly from their own community rather than from financial institutions like banks. Direct public offerings are sometimes regarded as a type of investment crowdfunding; but unlike the offerings made under crowdfunding exemptions (Title III of the federal JOBS Act or similar state laws), DPOs are typically registered at the state level and undergo some degree of regulatory scrutiny.  Direct public offerings can also be conducted on crowdfunding platforms.

Advantages of a direct public offering include broader access to investment capital, the ability to raise capital from a corporation’s own community (including non-wealthy investors). A company following the applicable rules and regulations can conduct a direct public offering. There are no sales, profit, asset or other traditional requirements or qualifications.

Companies interested in completing a Direct Public Offering must have:

  1. a complete set of internally generated financial statements (which can usually be unaudited)
  2. a disclosure statement (often called an offering memorandum or prospectus providing all information potential investors need to make an investment decision
  3. if applicable, state regulatory approval.

A company that conducts a DPO does not thereby become a publicly traded company, nor does it become subject to SEC reporting requirements.

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