Going Public: IPO, Direct Listing and SPAC
Three routes to a public listing, with different mechanics, different disclosure and different consequences for the shares that arrive on the market.
MadStockAlerts Research · Updated August 28, 2026
What to take away
- An IPO raises capital and is underwritten, with a lock-up and a price set by the syndicate.
- A direct listing raises nothing and has no underwriter setting a price.
- A SPAC is a shell that raises money first and finds a target afterwards.
- Redemption rights mean a SPAC's actual proceeds can be far below what it raised.
- The disclosure regimes and the resulting share supply differ substantially.
MAD Academy Training Video · 0:45
Three Doors Into the Public Market
IPO, direct listing and SPAC differ in who sets the price, who gets paid, and how much disclosure you get before you can buy.
This lesson is part of a Stock Alerts + Tools plan.
The three routes
| IPO | Direct listing | SPAC merger | |
|---|---|---|---|
| Capital raised | Yes, by the company | Traditionally none | Raised by the shell first |
| Underwriter sets a price | Yes | No. It opens on supply and demand | No; the deal is negotiated |
| Lock-up | Conventionally 180 days | Frequently none or shorter | Varies by agreement |
| Projections permitted | Restricted | Restricted | Historically more permissive, and since tightened |
| Primary document | S-1 | S-1 | A proxy or registration statement for the merger |
The third row has a direct effect on the shares available to trade. A listing with no lock-up has a much larger free float on day one, which is why direct listings frequently open with more supply and less of the first-day move an IPO can produce.
What a SPAC actually is
A special purpose acquisition company raises money into a trust with no operating business, lists, and then has a defined period to find and complete a merger. Holders vote on the transaction and may redeem their shares for their share of the trust instead.
- 1The shell raises into a trustWith no business yet
- 2A target is found and announced
- 3Holders vote, and may redeemTaking their share of the trust instead
- 4The merger completesWith whatever cash was not redeemed
Redemption rates have at times exceeded ninety percent. The sponsor's promote, warrants and the redemption arithmetic together mean the economics for a holder who arrives at the merger differ substantially from the headline size of the vehicle.
The first-day move
An IPO that opens well above its offer price is frequently described as successful. From the company's perspective it means shares were sold to the syndicate's clients below what the market would pay, which is capital the company did not raise.
That tension between underpricing and certainty of execution is the central criticism of the underwritten model and the main argument for the direct listing alternative. Both sides of it are legitimate.
What to read before any of them
- The registration statement in full, including the risk factors, which is the first complete disclosure the company has made.
- The dilution table, which states what everyone before you paid.
- The lock-up terms and the expiry date, which is a known future increase in supply.
- Any company-defined metrics and their definitions, which are set in the document.
- For a SPAC, the sponsor's economics and the redemption terms.
The lock-up expiry
A lock-up prevents insiders and pre-listing holders from selling for a stated period, conventionally around six months. Its expiry is a known future date on which the supply of shares available to trade increases.
- The date is disclosed in the prospectus and is therefore known from the first day of trading.
- The number of shares becoming eligible is also disclosed, frequently a multiple of the free float.
- Some agreements release shares in tranches or on early-release conditions tied to the price.
- Underwriters can waive a lock-up, which is disclosed and occasionally happens early.
The second item is the substantive one. A company whose free float is a tenth of its shares outstanding faces a lock-up expiry at which the tradeable supply can multiply, and the size of that increase is in the prospectus from the beginning.
This is also why the corporate events pillar treats a lock-up expiry as a calendar item rather than as news. It is scheduled, disclosed and quantified in advance, which distinguishes it from almost everything else that moves a recently listed security.