Description
A DPO is similar to an initial public offering (IPO) in that stock is sold to investors, but unlike an IPO, a company uses a DPO to raise capital directly and without the assistance of an investment banking firm or broker-dealer. Following registration with the Securities and Exchange Commission and subject to compliance with state blue sky laws, a company can sell its shares directly to anyone, including customers, employees, suppliers, distributors, family, friends and others.
There are law firms and other service providers which offer to manage a DPO for well under $100,000 and in less than a year. The process and time required to become public is very similar to the process utilized by large companies to complete an initial public offering, except that many DPOs are marketed via internet advertising and ads direct to consumers. Some, like Manhattan microbrewery Spring Street Brewery, advertise the sale on the products they sell (Spring Street printed a notice on the back of every bottle of beer.)
Direct public offerings are primarily utilized by small to medium size companies who are unable to attract the interest of an investment banking firm to represent them in a traditional initial public offering. Investment bankers represent companies which can attract and support large financing from which they can earn a commission.
Direct public offerings are now being issued on crowdfunding platform sites. This style of DPO combines the success of WIT capital and platforms like Kickstarter. An example of this type of platform would be IPO Village
Read more about this topic: Direct Public Offering
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