With that in mind, it's fair to say that now the financial industry started a movement towards the reduction of intermediaries and P2P offerings of their assets. With proper regulation in hand, investors from over the world are able to support the best businesses in a convenient way. Just imagine your regular share has to pass through the hands of brokers, transfer agents, clearing firms, custodians, and whatnot — at least 7 intermediaries in total. While in P2P models it can be reduced to the issuer, investor, issuance platform in between, and one regulator that can be executed in a form of a technological solution. The number of intermediaries is severely reduced, which allows for a significant issuance cost reduction, saves great amounts of time. The latest and greatest example of such model was demonstrated by Carta
. The platform is planning to launch
a private share trading platform that is expected to be an alternative to leading stock exchanges as fast-growing tech companies increasingly decide against initial public offerings. So which other new initiatives we have seen on the capital market?
A Direct Public Offering (DPO)
, also known as a direct listing is a way for a company to go public by selling existing shares instead of offering new ones. A company does not work with an investment bank to underwrite the issuing of stock. While forgoing the safety net of an underwriter provides a company with a quicker, less expensive way to raise capital, the opening stock price will be completely subject to market demand and potential market swings.
Going public via a DPO is traditionally faster and cheaper than going public via an IPO. In a traditional IPO, one or more investment banks serve to underwrite the issuing stock. In this role, they manage several aspects for an IPO that add cost to the business and time to go public, but also security to the process. When a company goes public via an IPO, the underwriters distribute shares among select brokerages who then impose restrictions on who is allowed to participate in the IPO. This can make it hard for all investors to gain access to IPOs.
With DPOs, there is an even playing field, with stocks being listed on the market for everyone to access and trade. The availability of shares is dependent upon early investors, while the price is dependent upon market demand. This makes a DPO a potentially riskier route than an IPO as there could be more volatility and market swings. The DPO model still operates by the same old rules but with a significant improvement. Long-Term Stock Exchange