Paths to the Public Markets

A company can reach U.S. public investors through a traditional underwritten IPO, a direct listing, a merger with a SPAC, or a Regulation A Tier 2 offering. The first three end with a registration statement and an exchange-listed, SEC-reporting company; Regulation A is an exemption from registration capped at $75 million in any 12 months for Tier 2. Each route trades off price discovery, cost, certainty, and liability differently.

Why companies go public at all

The SEC lists several common reasons for going public: raising capital and broadening future access to capital, creating liquidity for owners and employees, using stock as acquisition currency, compensating employees with public equity, and building brand awareness ^[7]. The same SEC guidance lists the costs: the offering takes time and money, the company takes on ongoing reporting obligations, management can be held liable if those obligations are not met, and competitors gain access to information such as financial statements and material contracts ^[7].

The legal starting point is the Securities Act of 1933. A company may not lawfully offer or sell shares unless the transaction is registered with the SEC or an exemption applies ^[2]. For a registered public offering, the company must file a registration statement before it may offer its securities, and it may not actually sell them until the SEC staff declares the registration statement effective ^[1]. Once that registration statement is effective, the company becomes subject to Exchange Act reporting requirements ^[1].

Route 1: the traditional underwritten IPO

In a traditional IPO, investment banks act as underwriters: they manage and sell the offering for the company ^[2]. Before the registration statement becomes effective, the underwriters typically collect indications of interest from prospective investors and use them to recommend a price, which the issuer ultimately decides ^[2]. The company usually also applies to list its shares on an established exchange such as the New York Stock Exchange or Nasdaq ^[2]. The underwritten IPO remains the reference model; the other routes are best understood by what they change about it.

Route 2: the direct listing

In a direct listing, shares begin trading on an exchange without a conventional underwritten offering. The NYSE's rules recognize a "Selling Shareholder Direct Floor Listing," in which a company that sold shares privately lists at the effectiveness of a registration statement filed solely to let existing shareholders sell ^[3]. On December 22, 2020, the SEC approved an NYSE rule change adding a "Primary Direct Floor Listing," in which the company itself sells shares in the opening auction on its first day of trading, in addition to or instead of selling shareholders ^[3]. The approval order describes this as a primary offering conducted as part of a direct listing without a firm commitment underwritten offering ^[3].

The trade-off is straightforward to state. A direct listing replaces the bookbuilt offering price with an auction, and it can avoid much of the underwriting spread, but the company gives up the price support, allocation control, and distribution effort that a syndicate provides.

Route 3: the SPAC and the de-SPAC transaction

A special purpose acquisition company (SPAC) raises money in its own IPO and later merges with a private operating company, a step called the de-SPAC transaction ^[4]. On January 24, 2024, the SEC adopted final rules to enhance investor protection in SPAC IPOs and de-SPAC transactions ^[4]. Among other things, the rules require enhanced disclosure about conflicts of interest, sponsor compensation, and dilution; in certain situations they require the target company to sign the registration statement as a co-registrant; they make the Private Securities Litigation Reform Act safe harbor for forward-looking statements unavailable to certain blank check companies, including SPACs; and they add disclosure requirements for projections ^[4].

Those rules became effective in July 2024 ^[5]. In March 2025, the SEC's Division of Corporation Finance expanded its nonpublic review process to cover de-SPAC transactions in which the SPAC is the surviving entity, as long as the target is itself eligible to submit a draft registration statement ^[5]. The practical effect of the 2024 rules is that a de-SPAC now looks much more like a traditional IPO in disclosure and liability terms ^[4].

Route 4: Regulation A Tier 2

Regulation A is an exemption from registration for public offerings, with two tiers: Tier 1 for offerings of up to $20 million in a 12-month period and Tier 2 for offerings of up to $75 million in a 12-month period ^[6]. Tier 2 carries additional requirements, including limits on how much a non-accredited investor may invest, audited financial statements, and ongoing reports, and Tier 2 issuers are not required to register or qualify their offerings with state securities regulators ^[6]. Because it is an exemption rather than a registered offering, Regulation A is usually discussed as a smaller-company alternative rather than a substitute for a large IPO.

• Underwritten IPO: registration statement, bookbuilt price, underwriter distribution and stabilization.
• Direct listing: registration statement, opening-auction price, no firm commitment underwriting; may include a primary sale under NYSE rules approved in December 2020.
• De-SPAC: merger with an already-listed SPAC; since 2024, IPO-like disclosure, projections rules, and co-registrant liability for the target.
• Regulation A Tier 2: exempt public offering of up to $75 million in 12 months, with ongoing reporting and state preemption.

Key terms

Registration statement

The disclosure document filed with the SEC under the Securities Act before securities can be offered; sales may occur only after it is declared effective.

Underwriter

An investment bank that manages and sells an offering for the issuer, typically building the order book and recommending a price.

Selling Shareholder Direct Floor Listing

An NYSE listing in which existing holders sell shares at the effectiveness of a resale registration statement, without a company capital raise.

Primary Direct Floor Listing

An NYSE listing, approved by the SEC in December 2020, in which the company sells new shares in the first-day opening auction without a firm commitment underwriting.

SPAC

A special purpose acquisition company: a shell company that raises money in an IPO in order to merge later with a private operating company.

De-SPAC transaction

The business combination between a SPAC and a private target company, through which the target becomes public.

Regulation A Tier 2

An exemption from Securities Act registration for public offerings of up to $75 million in a 12-month period, with audited financials and ongoing reporting.

Check your understanding

Sources

1. [1]U.S. Securities and Exchange Commission, “Going Public,” June 21, 2024.
2. [2]U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, “Investor Bulletin: Investing in an IPO,” Accessed November 2026.
3. [3]U.S. Securities and Exchange Commission, “Self-Regulatory Organizations; New York Stock Exchange LLC; Order Setting Aside Action by Delegated Authority and Approving a Proposed Rule Change, as Modified by Amendment No. 2, to Amend Chapter One of the Listed Company Manual to Modify the Provisions Relating to Direct Listings (Release No. 34-90768),” December 22, 2020.
4. [4]U.S. Securities and Exchange Commission, “SEC Adopts Rules to Enhance Investor Protections Relating to SPACs, Shell Companies, and Projections,” January 24, 2024.
5. [5]U.S. Securities and Exchange Commission, Division of Corporation Finance, “Enhanced Accommodations for Issuers Submitting Draft Registration Statements,” March 3, 2025.
6. [6]U.S. Securities and Exchange Commission, “Regulation A,” June 13, 2024.
7. [7]U.S. Securities and Exchange Commission, “Should My Company "Go Public"?,” June 4, 2024.

Educational content only — not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Rules and data are described as of November 2026 and may change. Securities offered through Umergence LLC, Member FINRA/SIPC.