An initial public offering (IPO) is the first public sale of stock shares by a private company. IPOs are important to the financial markets because they help fuel the growth of innovative young companies and add new stocks to the pool of potential investment opportunities.
When a company files for an IPO, new shares are created, underwritten by a bank, and sold to the public. But that’s not the only way for a company’s stock to become publicly traded. When a company uses a direct listing, typically only existing shares are sold to the public on a stock exchange — no new shares are issued, and no underwriters are involved.
There were more U.S. IPOs in the first half of 2021 than there were in all of 2020, which was also a record year.1 The number of direct listings has ticked up, too, but there were just three in 2020 and four in the first half of 2021.2