Three Roads to the Public Markets

Traditional IPO, direct listing, or de-SPAC merger. A board-level comparison of what each path costs, what each path buys, and how to choose between them.

There is more than one way to ring the bell. A company can sell new shares through an underwritten offering, open its existing shares to trading without raising a dollar, or merge into a vehicle that is already listed. Each path ends at the same place: a ticker, a public currency, and a quarterly reporting calendar. What differs is the price of admission, and just as importantly, what that price actually buys.

In our first briefing in this series, we walked through the full cost stack of a traditional IPO across three phases: readiness, the transaction itself, and the first year as a public company. This companion piece widens the lens. For boards weighing how to go public rather than simply whether, the right comparison is not fee schedule against fee schedule. It is total economic cost against the specific benefits each structure delivers.

One framing principle before the numbers. The phase one readiness costs and the phase three costs of being public are essentially identical across all three paths. PCAOB-standard audits, public-company governance, reporting infrastructure, and incremental headcount do not care how you arrived. The real differences live in the transaction itself, and in three categories of cost that never appear on an invoice: dilution, pricing risk, and certainty.

Path One: The Traditional IPO

The underwritten offering remains the default for a reason. A syndicate builds the book, prices the deal against institutional demand, stabilizes trading in the aftermarket, and typically initiates research coverage. For a company raising $100 million, the direct costs run roughly $7.5 to $12.5 million, anchored by an underwriting fee of four and a half to seven percent.

What that buys: primary capital at a negotiated valuation, institutional validation of the story, a marketed roadshow that builds the shareholder register deliberately, and a banking relationship that supports follow-on offerings. For most companies without a household brand, this support is not a luxury. It is how the stock finds its first real owners.

The costs beyond the invoice deserve equal attention. IPO underpricing, the first-day pop that headlines celebrate, is money left on the table by existing shareholders. Academic studies consistently place the average first-day return well into double digits, which on a $100 million raise can dwarf every fee in the deal. Add customary lockups of 180 days for insiders, and the traditional path asks existing holders to pay for stability with both dilution and patience.

Path Two: The Direct Listing

A direct listing removes the syndicate. Existing shares simply begin trading at a price set by an opening auction, with financial advisors guiding the process in place of underwriters. The headline economics are compelling: no underwriting fee, no underpricing transfer, and historically no lockup. Direct costs typically land in the $3 to $6 million range, mostly advisory fees, counsel, audit procedures, and the registration statement process, which is still required in full.

What it does not buy matters just as much. A traditional direct listing raises no primary capital, although exchange rules now permit a primary raise within the auction for companies that qualify. There is no stabilization, no organized bookbuilding, and frequently thinner research coverage. The structure works best for companies with strong brand recognition, a broad existing shareholder base seeking liquidity, and no immediate need for cash.

That profile describes very few small-cap companies. At a $1 billion enterprise value without consumer name recognition, the savings on fees can be quickly consumed by the cost of an illiquid, volatile opening market. A direct listing is the cheapest path on paper and often the most expensive path in trading outcomes for companies that lack a natural investor following.

Path Three: The De-SPAC Merger

Merging with a special purpose acquisition company turns the listing into a negotiated M&A transaction. The target agrees on a valuation with the sponsor, files a merger registration statement and proxy, raises supplemental capital through a PIPE, and emerges public at closing.

The benefit profile is distinct. Valuation is negotiated upfront rather than discovered in a pricing meeting, which transfers market risk away from the company during the process. The sponsor contributes deal expertise, public-market infrastructure, and capital relationships. And the combined raise, trust proceeds plus PIPE, can exceed what a traditional offering of similar size would deliver, with the merger process accommodating more complex stories than a conventional roadshow.

The cost structure is equally distinct, and boards should examine all of it. Cash costs typically include deferred underwriting fees from the original SPAC offering, PIPE placement fees of three and a half to five percent, and a heavier legal and accounting load than a conventional offering, since the merger registration statement, proxy process, and combined-company financials add real work. But the largest line is usually not cash at all. The sponsor promote, founder shares typically equal to twenty percent of the SPAC's original share count, is dilution borne by all shareholders, and redemptions can shrink the trust delivery substantially, raising the effective cost of the capital that actually arrives. A well-negotiated transaction addresses both: promote subject to earnouts or forfeiture, minimum cash conditions, and a committed PIPE that anchors the raise regardless of redemption behavior.

The Comparison, Side by Side

For a representative company at roughly a $1 billion enterprise value seeking $100 million, the three paths compare as follows.

Direct Cash Costs

• Traditional IPO: $7.5M to $12.5M
• Direct Listing: $3M to $6M
• De-SPAC: $8M to $15M including PIPE fees

Largest Hidden Cost

• Traditional IPO: Underpricing borne by existing holders
• Direct Listing: Thin liquidity, volatile opening trading
• De-SPAC: Sponsor promote dilution, redemptions

Primary Capital

• Traditional IPO: Yes, sized by bookbuild
• Direct Listing: Traditionally none; primary raise possible if qualified
• De-SPAC: Trust plus committed PIPE

Valuation Certainty

• Traditional IPO: Set at pricing, market dependent
• Direct Listing: Set by opening auction
• De-SPAC: Negotiated upfront with sponsor

Aftermarket Support

• Traditional IPO: Syndicate stabilization, research coverage
• Direct Listing: None organized
• De-SPAC: Sponsor alignment, PIPE anchor investors

Timeline

• Traditional IPO: 6 to 9 months from kickoff
• Direct Listing: 4 to 7 months
• De-SPAC: 4 to 8 months from signed agreement

Best Suited For

• Traditional IPO: Companies needing capital, validation, and a built register
• Direct Listing: Known brands with broad holder bases seeking liquidity
• De-SPAC: Complex stories valuing certainty and a sponsor partner

Illustrative comparison for a ~$1B enterprise value company. Phase one readiness and phase three public-company costs are broadly equivalent across all paths.

How to Actually Choose

In our experience, the decision turns on four questions, asked in order.

How much capital do you actually need? If the answer is meaningful primary capital, the direct listing falls away for most companies and the choice narrows to an underwritten offering or a de-SPAC with a committed PIPE. If the answer is liquidity for existing holders with no cash need, the direct listing earns its consideration.

How well does the market already know you? Aftermarket support is the product the traditional IPO sells. Companies with natural investor followings can buy less of it. Companies that will be discovered for the first time on listing day should be wary of paths that provide none.

How much does valuation certainty matter? A company with a complex story, a volatile sector, or a narrow market window may rationally pay the de-SPAC's dilution cost to lock a valuation months before closing. A company with a clean comp set and a patient timeline may capture better economics in a marketed offering.

What does the all-in cost look like after the hidden lines? Run each path with everything in: fees, expected underpricing, promote dilution, redemption scenarios, and lockup constraints. Boards are routinely surprised to find the cheapest looking path is not the cheapest, and the most expensive looking path delivers the most value per dollar for their specific situation.

There is no universally correct answer, which is precisely why the analysis is worth doing properly. The path to the public markets is a capital allocation decision like any other, and the boards that treat it that way arrive at listing day with economics they chose rather than economics that happened to them.

*This briefing is part of the Belay Global Partners Public-Market Readiness Series. A downloadable PDF version of this comparison is available [here](/belay-three-roads-public-markets.pdf).*