Direct Public Offering (DPO)

Definition:

A situation in which a company sells its shares directly to the public without the help of underwriters

Direct public offerings (DPOs) allow you to sell stock directly to the public without the registration and reporting requirements of an initial public offering. DPOs are specifically designed to let small businesses access the public capital markets with less cost and complexity than is involved in IPOs.

DPOs typically raise amounts of less than $1 million, but you can raise up to $25 million with a DPO under certain circumstances. You can also advertise and promote the sale of your own stock if you hold a DPO, something other public companies are forbidden to do.

DPOs’ main limitation is the lack of a secondary market for securities. That means the stock of a DPO company is illiquid, meaning the ability of shareholders to sell shares on the open market is limited, and they may have difficulty finding buyers for their shares in the event they want to sell. That’s not necessarily bad for you, but it can be a deterrent to investors.

Related Content

Product Development

The overall process of strategy, organization, concept generation, product and marketing plan creation and evaluation, and commercialization of a new product

Exit Interview

The formal conversation that takes place between an employee and an HR or other manager to determine the reason(s) the employee is leaving

Primary Market Research

Iinformation that comes directly from the source--that is, potential customers. You can compile this information yourself or hire someone else to gather it for you via surveys, focus groups and other methods.

Credit Policy

Guidelines that spell out how to decide which customers are sold on open account, the exact payment terms, the limits set on outstanding balances and how to deal with delinquent accounts

Mergers

The combination of one or more corporations, LLCs, or other business entities into a single business entity; the joining of two or more companies to achieve greater efficiencies of scale and productivity

Subchapter S Corporation

A special form of corporation that allows the protection of limited liability but direct flow-through of profits and losses