Direct Listing or IPO?

96 Pages Posted: 19 Nov 2020 Last revised: 23 Jan 2023

See all articles by Miles Zheng

Miles Zheng

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: August 8, 2022


A direct listing (DL) unbundles underwriting and capital-raising in the going-public process. This paper shows that initiations of U.S. DLs have spillover effects that reduce underpricing costs in the IPO market, particularly for firms less subject to informational frictions. DL caters to later-stage firms’ desire for public trading at lower costs: compared with IPO firms, DL firms are larger and older, incur lower underpricing costs, grow more slowly, and exhibit better long-run performance. The results suggest that the U.S. DL innovations reduce intermediary market power in both the DL and IPO markets and improve public market access for later-stage firms.

Keywords: Direct Listing, Financial Innovation, Market Structure, Investment Banking, Adverse Selection

JEL Classification: G24; G32

Suggested Citation

Zheng, Miles, Direct Listing or IPO? (August 8, 2022). Available at SSRN: or

Miles Zheng (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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