Securities Law, NYSE, NASDAQ & OTC Markets Listings & Compliance

Direct Public Offerings in 2025

A Direct Public Offering (DPO) is an effective method for private companies to raise capital by selling securities directly to the public without intermediaries like underwriters or investment banks. This approach, also known as a direct listing, eliminates many of the costs and complexities associated with traditional Initial Public Offerings (IPOs) or reverse mergers, making it an attractive option for small to mid-sized companies seeking public company status. Below, we explore the key aspects of DPOs, their benefits, regulatory requirements, and practical considerations for issuers in 2025, based on the latest insights from securities law experts.

What is a Direct Public Offering?

A DPO allows a company to offer its securities—such as common shares, preferred shares, or debt securities—directly to investors, bypassing the need for underwriters or broker-dealers. Unlike an IPO, which involves a structured process with investment banks, a DPO enables issuers to self-underwrite and tailor the offering to their specific needs and requirements. This flexibility makes DPOs appealing to companies with established client bases or those unable to secure an underwriter. The process typically involves filing a registration statement, most commonly a Form S-1, with the Securities and Exchange Commission (SEC) under the Securities Act of 1933.

DPOs can be completed in as little as 90 days, compared to a year or more often required for an IPO. They also create unrestricted securities, unlike Form 10 registration statements, which may result in restricted securities. This efficiency and flexibility make DPOs a viable alternative for companies aiming to go public quickly and cost-effectively. 

Benefits of Direct Public Offerings

DPOs offer several advantages over traditional IPOs or reverse mergers, particularly in the current economic climate of 2025:

• Cost Efficiency: By eliminating intermediaries, DPOs significantly reduce the costs associated with going public, such as underwriting fees. This is particularly beneficial for smaller companies or startups with limited resources.
• Flexibility and Control: Issuers have full control over the offering terms, including the share price, minimum investment per investor, and offering period. This allows companies to align the offering with their strategic goal. 
• Fewer Regulatory Hurdles: DPOs often qualify for exemptions from SEC registration, such as the intrastate exemption under Rule 147, reducing compliance burdens in certain cases. For example, companies incorporated in a state and selling securities only to residents of that state may not need to register with the SEC.
• Avoidance of Reverse Merger Risks: Unlike reverse mergers, which can involve public shells with problematic histories, DPOs minimize risks like Depository Trust Company (DTC) chills or global locks due to prior unregistered securities issuances.
• Access to Diverse Investors: DPOs allow companies to sell securities to both accredited and non-accredited investors, including employees, clients, and suppliers, broadening the investor base.

Despite these benefits, going public via a DPO involves significant regulatory scrutiny and ongoing reporting obligations, which can be costly and time-consuming. Companies must weigh these factors against the advantages.

Common structures for going public directly

1. Registered offering (Form S-1) — a traditional registration under the Securities Act, which leads to SEC reporting status and requires audited financial statements and the usual ongoing Exchange Act reporting (Forms 10-K, 10-Q, and 8-K) once effective.
2. Regulation A (Tier 1 or Tier 2 / “Reg A+”) — lighter than S-1 in some respects and useful for smaller raises; Tier 2 increases offering caps and brings periodic reporting requirements under Reg A. The SEC reviews the offering statement and issues comments that issuers must address.
   
3. Exempt offerings (Rule 506(b) / Rule 506(c)) — private placement exemptions that may allow general solicitation under 506(c) when accredited-investor verification is used; these offerings can be combined with efforts to get a security quoted on OTC markets after the offering, but they do not themselves create SEC reporting status unless you register later.
4. Direct listing / non-traditional IPO processes — another path where pre-existing shareholders list shares for trading without a traditional underwritten issuance; processes and requirements differ from DPOs and IPOs, and should be compared carefully.

Key regulatory and market steps you cannot skip

• Disclosure & SEC review. Registered routes (Form S-1, Reg A) are reviewed by the SEC; expect comment cycles and the need for amendments until the filing is declared effective.
  
• Audited financials & accountants. Most routes that lead to public reporting require audited financial statements (often two years or the applicable shorter period) prepared under GAAP and audited by a registered PCAOB firm. Plan audit timelines early.
• Transfer agent setup. The transfer agent maintains shareholder records and is critical for smooth share issuance and later trading. Choose a qualified transfer agent early and set up issuance processes prior to trading.
• Form 211 / market maker & OTC quotation. For OTC quotation, you will usually need a sponsoring market maker to file a Form 211 with FINRA; market makers must perform due diligence and can make the process burdensome—especially if FINRA suspects shell-company issues. Get a market-maker commitment before relying on OTC trading.
• DTC eligibility. To enable electronic, institutional trading, your securities must be DTC eligible; a DTC participant (typically a market maker or broker) usually handles the application process. Plan to coordinate Form 211 and DTC work together.

Risks and common pitfalls

• Disclosure/documentation traps. Even without underwriters, you must provide full, accurate disclosures. The SEC and FINRA review websites, press releases, and other public statements for misleading claims and will comment or act if disclosures are incomplete or misleading.
• Shell-company scrutiny. FINRA and market makers scrutinize whether an issuer is a shell or has meaningful operations; a lack of evidence of operations can delay or block quotations.
• Liquidity & market-maker availability. Finding a sponsoring market maker and achieving DTC eligibility can be harder than anticipated, affecting liquidity and trading.
• Post-offering reporting burden. Registered offerings typically convert a company into an ongoing SEC reporting company with recurring compliance costs and obligations. Factor those recurring expenses into your plan.

Practical tips and timing

• Start audits and accounting early. Audits can take months; begin your auditor search and GAAP restatements early in the planning stage.
• Engage experienced securities counsel. A qualified securities attorney drafts filings, manages SEC comment responses, and coordinates regulatory relationships (SEC, FINRA, transfer agents, DTC). Lawyers experienced in DPOs will also help anticipate shell status questions and integration issues.
  
• Prepare written evidence of operations. If you don’t have significant revenues, assemble documentary evidence showing meaningful operations (contracts, customers, IP, payroll, business plans) to address FINRA inquiries.
• Coordinate Form 211 and DTC early. Line up your market maker and DTC participant as part of your pre-trading checklist to avoid last-minute delays.

The Role of a Securities Attorney

An experienced securities attorney is critical to navigating the complex DPO process. Key responsibilities include:

• Structuring the Offering: Advising on the optimal structure, whether a primary offering, secondary offering for selling shareholders, or a combination.
• Drafting Disclosures: Preparing the registration statement and prospectus to meet SEC and FINRA standards, ensuring transparency and avoiding misleading statements.
• Regulatory Compliance: Guiding the company through SEC and state filings, responding to SEC comments, and coordinating with transfer agents and market makers.
• Due Diligence: Conducting due diligence to identify and address potential legal issues, such as prior unregistered securities sales, that could trigger DTC restrictions.

Engaging a securities attorney early—ideally before filing with the SEC—helps ensure a smooth and compliant process.

Short checklist

• Choose offering path: Form S-1 (registered), Reg A (Tier 1/2), or exempt (506(c), etc.).
• Engage securities counsel and an auditor.
• Prepare and file offering statement/registration statement; respond to SEC comments.
• Set up the transfer agent, issue subscription shares, and document the shareholder ledger.
• Secure sponsoring market maker; prepare Form 211 and DTC application.
• Plan for post-offering reporting, compliance, and investor communications.

Recent Developments in 2025

In 2025, DPOs remain a compelling option despite economic challenges, as companies seek cost-effective ways to access U.S. capital markets. Recent regulatory changes, such as the SEC’s decision to end its defense of climate disclosure rules and the striking down of Nasdaq’s diversity disclosure rules, highlight the evolving regulatory landscape. These changes underscore the importance of staying updated on SEC and FINRA requirements to ensure compliance.

Closing thoughts

A DPO can be a cost-effective and flexible route to public markets for many issuers; however, expect thorough disclosure work, audited financials where required, and coordination with market makers, transfer agents, and DTC. Early planning, the right advisers (securities counsel, PCAOB auditors, experienced transfer agents, and market-maker contacts), and disciplined disclosure practices make the difference between a smooth DPO and lengthy regulatory delays.

If you have questions about taking your company public or would like to speak with a Securities Attorney, Hamilton & Associates Law Group, P.A. is ready to help. Our Founder, Brenda Hamilton, is a nationally known and recognized securities attorney with over two decades of experience assisting issuers worldwide with going public on the Nasdaq, NYSE, and OTC Markets. Since 1998, Ms. Hamilton has been a leading voice in corporate and securities law, representing both domestic and international clients across diverse industries and jurisdictions. Whether you are taking your company public, raising capital, navigating regulatory challenges, or entering new markets, Brenda Hamilton and her team deliver the experience, strategic insight, and results-driven representation you need to succeed.

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com