Key

• IPO (Initial Public Offering): A company's first offering of shares to the public, which is an important way for enterprises to raise funds.
• Direct Listing: Instead of issuing new shares, existing shareholders directly sell their shares on the exchange.
• Listing by Introduction: A company that has already issued securities lists on another exchange without involving fundraising.
• SPAC (Special Purpose Acquisition Company): A shell company established for the purpose of acquiring other companies, which can enable the target company to go public quickly.
• Underwriter: A financial institution that assists a company in issuing securities, undertaking functions such as price discovery and price stabilization.

Abstract

Reddit successfully completed an IPO in March this year and reserved 8% of its shares for users. Its stock price has performed well. This podcast episode focuses on unconventional listing options, aiming to help listeners understand the innovative attempts made by practitioners to achieve better asset liquidity and reasonable pricing. The program delves deep into three major categories of options: direct listing, listing by introduction, and merger - and - acquisition - based listing, and explores the much - discussed pricing mechanism during the IPO process. Through an analysis of the advantages and disadvantages of different listing options, it reveals the diverse paths that enterprises can take to seek development in the capital market.

Insights

The content of this podcast has significant practical significance and application value. It not only helps listeners understand the various forms of IPOs but also reveals the fierce competition among exchanges and the resulting institutional innovations. For enterprises, choosing the right listing option is crucial as it is directly related to financing efficiency, shareholder interests, and the company's future development. In addition, the exploration of the IPO pricing mechanism helps investors evaluate the value of new shares more rationally and reduce investment risks.

Views

01 "Pain Points of the Traditional IPO Process"

The traditional IPO process is cumbersome, time - consuming, and costly. Moreover, the company needs to be exposed to the public for a long time, with many restrictions.

02 "Competition among Exchanges Drives IPO Innovation"

Major securities exchanges are competing to attract high - quality enterprises to list by carrying out institutional innovations and relaxing regulations, giving rise to a variety of unconventional IPO options.

03 "Advantages and Risks of Direct Listing"

Direct listing can save intermediate costs and simplify the process. However, without underwriters to set the price, the stock price may be more volatile, and in the early stage, only existing shareholders are allowed to exit.

In - depth Analysis

Unconventional IPO Options: Diverse Choices for Enterprises to Go Public

Introduction

In today's increasingly active capital market, the traditional initial public offering (IPO) is no longer the only option for enterprises to go public. With the intensifying competition among exchanges and the innovation of regulatory policies, various unconventional IPO options have emerged, providing enterprises with more flexible and diverse listing paths. This in - depth report will focus on three major categories of unconventional IPO options: direct listing, listing by introduction, and merger - and - acquisition - based listing. It will conduct an in - depth analysis of their characteristics, advantages, and risks, and explore their impact on enterprise development and the capital market.

Direct Listing: A New Option for Existing Shareholders to Exit

Direct listing is a listing method where, instead of going through the traditional IPO process to issue new shares, a company's existing shareholders directly sell their shares on the exchange. This method was initially regarded as an exit option for existing shareholders, and the company itself cannot raise funds through the listing.

The main advantage of direct listing is that it saves a large amount of intermediate costs and simplifies the listing process. Take Spotify as an example. In 2018, the company adopted the direct listing method and only paid $35 million in financial advisor fees, far less than the underwriting fees required for a traditional IPO. In addition, direct listing can avoid the common "valuation depression" problem in the IPO process, allowing existing shareholders to sell their shares at a price closer to the market value.

However, direct listing also has certain risks. Since there are no underwriters to set the price, the stock price may be more volatile. In addition, in the early stage of direct listing, only existing shareholders are allowed to sell their shares, and the company cannot raise funds through the listing, which limits its development to a certain extent.

To solve the financing problem, the U.S. Securities and Exchange Commission (SEC) relaxed the restrictions on direct listing in 2020, allowing companies to issue new shares while conducting a direct listing. However, this new model has not been widely adopted, possibly due to regulatory and market concerns about the pricing of new shares.

Listing by Introduction: A Characteristic Option in the Hong Kong Stock Market

Listing by introduction is a listing method launched by the Hong Kong Stock Exchange. Similar to direct listing, it does not involve the issuance of new shares and fundraising. Companies that choose listing by introduction usually need to wait six months after listing before they can raise funds.

Listing by introduction can be divided into several types, such as spin - off listing, dual listing, and secondary listing. Spin - off listing refers to separating a part of a listed company's business and listing it independently. Dual listing means that a company lists on two exchanges simultaneously. Secondary listing means that a company lists on another exchange on the basis of its existing listing.

The main advantage of listing by introduction is that it can achieve listing quickly, saving time and costs. However, since it does not involve fundraising, the company needs to have certain financial strength and market popularity.

Merger - and - Acquisition - Based Listing: Alternative Paths of Back - Door Listing and SPAC

Merger - and - acquisition - based listing refers to achieving listing by acquiring a listed company or being acquired by a listed company. Among them, back - door listing (reverse acquisition) means that an unlisted company acquires a listed company to achieve its own listing.

The advantage of back - door listing is that it can bypass the cumbersome IPO process and achieve listing quickly. However, back - door listing also has certain risks, such as the quality of the shell company and changes in regulatory policies.

In recent years, a listing method called SPAC (Special Purpose Acquisition Company) has gradually emerged. A SPAC is a shell company established for the purpose of acquiring other companies. It raises funds through an IPO and then searches for a suitable acquisition target within a certain period. If the SPAC successfully acquires the target company, the target company can go public.

The advantage of the SPAC model is that it can simplify the listing process and reduce the listing cost. However, the SPAC also has certain risks, such as the conflict of interests of the SPAC management and the quality of the acquisition target.

IPO Pricing: The Role and Challenges of Underwriters

IPO pricing is a crucial part of the IPO process. In traditional IPO pricing, underwriters (investment banks) usually take the lead. Through the book - building mechanism, underwriters comprehensively consider the company's valuation, market conditions, and investor demand to finally determine the issue price.

Underwriters play an important role in IPO pricing. They can not only provide professional valuation and pricing advice but also take on the responsibility of stabilizing the price. However, underwriters may also have conflicts of interest. For example, they may lower the issue price to obtain higher underwriting fees.

To solve the problems in IPO pricing, some companies have begun to try new pricing methods such as direct listing or Dutch auction. In direct listing, there are no underwriters involved in pricing, and the price is determined by market supply and demand. In a Dutch auction, investors freely quote within a certain price range, and the highest price acceptable to all investors is used as the issue price.

Conclusion and Outlook

Unconventional IPO options provide enterprises with more flexible and diverse listing choices. Direct listing, listing by introduction, and merger - and - acquisition - based listing each have their own advantages and disadvantages, and enterprises should choose the appropriate listing method according to their own situation.

With the continuous development of the capital market and the innovation of regulatory policies, more new IPO options may emerge in the future. Enterprises should closely monitor market dynamics and actively explore listing paths suitable for their own development.

At the same time, investors should also remain rational, fully understand the risks and returns of different listing options, and make wise investment decisions.