A direct public offering (DPO) is a means of raising capital by selling equity shares of the company directly to individuals including customers, employees, vendors and other community members. There is no prerequisite size or profit numbers a company must have for a DPO, though these numbers will likely influence the company’s ability to secure investors and the amount of capital it can raise.
Unlike an Initial Public Offering (IPO), a DPO does not require the use of an investment firm or broker-dealer, is less restrictive, and much less expensive. Because DPO’s market to people more personally familiar with the company, the shareholders tend to have more company loyalty. The downside is that DPOs do not generate as much initial investment because they must market direct, without the help of professional financiers.
DPOs are a good option for businesses that aren’t able to secure representation from a traditional investment banking firm for an IPO or want more control over their mix of shareholders and company decisions. A DPO can cost between $50,000 and $100,000 and take from 6 months to a year to be completed. To file a DPO, a company must have both internal and audited financial statements and must file with the Securities and Exchange Commission. Private firms specializing in DPOs can assist with the paperwork and ensuring compliance with regulations associated with DPOs.