Direct Public Offerings

Direct Public Offerings are like Do-It-Yourself IPOs. And for investors, they can be a great alternative to IPOs.

For individual investors, investing in an IPO is often a dicey proposition. IPOs are priced to ‘pop,’ so that the folks who get in early (venture capitalists, institutional investors, and well-connected  investment banking clients) make a nice profit when the shares inevitably rise once they begin trading. But you, the regular Joe investor, can only buy in at the higher price. More and more, promising companies are putting off going public, because they can raise plenty of money in the private market. As a result, the bulk of a company’s value these days is created before the IPO, with the spoils going to early, private investors.

Well, there’s another option: Direct Public Offerings, or DPOs. In a DPO, the company raising money sells shares directly to the public, bypassing the Wall Street intermediary.  So instead of the shares going to the Wall Street underwriter’s well-heeled clients, everyday investors—including the company’s customers, friends, fans and supporters—can get in at the ground floor, and reap the same kind of returns (or losses) that are typically reserved for insiders. And, by cutting out the financial middleman, DPOs are accessible to companies that would not be able to afford a conventional IPO, which can easily cost $1 million or more.

DPOs are perfectly legal. They are typically conducted under one of three existing securities exemptions: Regulation A, Regulation D, or Rule 147 (the intrastate exemption), which applies to companies that operate primarily in a single state and limit share sales to that state.

Still, Direct Public Offerings are not very common. The best known example is Ben & Jerry’s, which in 1984 raised $750,000 by selling shares priced at $10.50 a piece (with a 12-share minimum) directly to Vermont residents (through Reg A, the which allows companies to advertise their offerings). Advertising copy on pints of Ben & Jerry’s urged customers to “Get a scoop of the action!” Customers leapt at the chance—and did quite well when the company went public on the NY Stock Exchange the next year.

More recent examples of DPOs include the Saranac Lake Community Store, Quimper Mercantile and Real Pickles.


Cutting EdgeX is a web site that lists DPO investment opportunities.


  • DPOs give investors an opportunity to get in on the ground floor of exciting investment opportunities and participate in high risk/reward venture-stage funding typically limited to wealthy or institutional investors.
  • A DPO may be serve as an initial fund raising event before a company goes on to a conventional IPO. Companies such as Ben & Jerry’s, for example, followed its DPO with successful IPOs, resulting in rich returns for early investors.
  • DPOs allow individuals a chance to invest in companies with whom they have an affinity or shared values, or whose products they like and admire. As a customer, you are contributing to the success of your investment.
  • Financial disclosure: DPOs require that companies prepare a comprehensive prospectus containing relevant financial information on the business, its finances and risk factors



  • DPOs are akin to public venture capital, with all of the risk/reward that come with early stage investing.
  • Liquidity is an issue. There may not be a way to trade shares on a secondary market, and when there is, volume may be scant. And not all companies will go on to an IPO or a sale.
  • There is no Wall Street underwriter conducting due diligence on the company. And lacking a market mechanism, companies issuing shares may set an arbitrary price.