Why not? "DPO" stands for "direct public offering." It's an offering. Insiders can now offer their stock to others for trade. Actual trades are not mandated. It just means the market is now open.
National exchanges like Nasdaq have minimum liquidity rules. To do a direct listing a certain amount of shares must be sold so that a trading market develops.
You're coming at it from the angle of, practically speaking, what do large exchanges require from their listers to agree to the process? While I'm talking about the literal definition and pure concept of a DPO.
There's no reason such high early liquidity is mandatory.
Sure in a theoretical world that doesn't exist you could have a DPO where nobody sells any shares. I'm not sure what relevance that has to our evaluation of the actual world that exists, though.
You haven't heard what I've said. My point is not that in the real world a market would exist without sales occuring (even though that is true).
My point is that the idea that some people "must" sell shares for there to be a market is false. "Must" implies: regardless of price.
If sales are not sold at opening-market prices, what happens is that offer prices increase until they are attractive enough to be filled.
This is a fill by mutual market price-discovery interest, rather than a fill by obligation. ("Must.")
My point is that "must" is incorrect, because even without it, trades would take place.
The idea that some group of insiders need to agree to liquidate no matter what on the first day is wrong, because natural market dynamics would incentivize it to happen anyway.
If sales are not sold at opening-market prices, what happens is that offer prices increase until they are attractive enough to be filled.
This is literally exactly what happens in a direct listing. There is no obligation anywhere. Each person selling is selling because the price offered is attractive to them.
It's not that a group of insiders has to liquidate because there's a DPO. It's that there's a DPO because a group of insiders wants to liquidate.
Comments
Why not? "DPO" stands for "direct public offering." It's an offering. Insiders can now offer their stock to others for trade. Actual trades are not mandated. It just means the market is now open.
National exchanges like Nasdaq have minimum liquidity rules. To do a direct listing a certain amount of shares must be sold so that a trading market develops.
You're coming at it from the angle of, practically speaking, what do large exchanges require from their listers to agree to the process? While I'm talking about the literal definition and pure concept of a DPO.
There's no reason such high early liquidity is mandatory.
Sure in a theoretical world that doesn't exist you could have a DPO where nobody sells any shares. I'm not sure what relevance that has to our evaluation of the actual world that exists, though.
You haven't heard what I've said. My point is not that in the real world a market would exist without sales occuring (even though that is true).
My point is that the idea that some people "must" sell shares for there to be a market is false. "Must" implies: regardless of price.
If sales are not sold at opening-market prices, what happens is that offer prices increase until they are attractive enough to be filled.
This is a fill by mutual market price-discovery interest, rather than a fill by obligation. ("Must.")
My point is that "must" is incorrect, because even without it, trades would take place.
The idea that some group of insiders need to agree to liquidate no matter what on the first day is wrong, because natural market dynamics would incentivize it to happen anyway.
This is literally exactly what happens in a direct listing. There is no obligation anywhere. Each person selling is selling because the price offered is attractive to them.
It's not that a group of insiders has to liquidate because there's a DPO. It's that there's a DPO because a group of insiders wants to liquidate.
This is not what you said. You said: "He sold a small fraction of his holdings, so that there would be shares to trade."