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Initial Public Offerings (IPOs) and direct listings

Corporate Advisory

What are IPOs and Direct Listing?

An Initial Public Offering (IPO) is a process whereby the shares of a privately held company are offered to the public.  The owners of the company sell a portion of their shares to the new shareholders and subsequently the shares start trading on the market.

Direct listing is another method used by private companies to list their stock on an exchange, in which no new shares are created and only existing shares are sold with no underwriters involved. In other words, it is not required that existing shareholders or owners of the company sell their shares or issue new shares. In order to acquire the shares, it will be necessary to wait until they are directly listed on the market.

What is the difference between IPOs and Direct Listings?

The main difference lies in the timing of the acquisition of the shares. In an IPO, it is possible to acquire the shares prior to the company’s going public, seeking to obtain a market revaluation at the time of getting listed. This possibility does not exist in a direct listing, since the company goes directly to the stock exchange without anyone benefiting from possible initial rises, whereas risk is minimised should negative events occur in the days prior to the listing.

The main reasons to go public are the following:

  • Increase in liquidity
  • Raising capital for business
  • Internationalisation
  • Media repercussion
  • Incentives for managers and employees.

What is Gesvalt’s added value in IPO – Direct Listing processes?

Gesvalt participates in these processes by accompanying companies that decide to gain access to listed markets, advising them on their valuation to determine the exit price range.

Services provided include:

  • Reviews of business plans and cash flow statements.
  • Valuation of both assets and equity.
  • Advice on determination of the exit price.
Consultor Gesvalt
Roberto Guiñales
Head of Financial Valuation