The Axis Direct IPO is a new stock issued by the private equity firm Warburg Pincus. It is called "Direct IPO" because it does not have an underwriter or a major brokerage firm acting as the front office for selling the shares of the new product. This makes it different from the other IPOs, which have major players like Morgan Stanley acting as the underwriters on behalf of institutional clients. This can have some significant advantages, and perhaps a lot of disadvantages depending upon how you look at it.
The biggest advantage to this system is that there are no major third party intermediaries that will be collecting fees on the sale of the shares of the new product. The investors who purchase the shares will be buying directly from the company, eliminating the need for such companies as Yodlee, Prudential Financial and Merrill Lynch. The fact that there is no need for these third parties eliminates the possibility of insider trading charges and fraud that have often been the downfall of companies that have used them. With no third party to be paid, there will be less opportunity for such activity.
One of the disadvantages of the direct IPO is that very few people will be aware of the product, or its offerings. This means that there is a lower potential for this product to be sold and a lower overall price per share due to the lack of advertising. It is not uncommon for companies to offer small amounts of product to increase their awareness with the public, but they do not normally make an offer to the entire public. This means that the number of investors that are aware of the product will be smaller than normal for an IPO offering.
The lack of advertisement also means that the company will not be able to maximize the value of the sale. A successful IPO comes from the willingness of the company to take in large volumes of investors with a product that is new, has benefits that attract many people, and the company has a great marketing plan in place to further spread the news about its offerings. Companies that choose not to advertise can expect to lose more money than they would with a direct IPO. There may also be less funding available if the company does not receive many investors with small enough capital amounts.
The company has opted to use the New York Stock Exchange to list its stock. This means that anyone can buy the stock and sell into it without having to wait for an official IPO announcement. Also, the listing is done on a junior exchange instead of a major exchange. This is a good thing because it means lesser risks for the company and therefore more potential for it to attract large volumes of investors interested in its offerings. In addition, many of the institutional investors who work with larger financial institutions have decided to avoid going through an IPO because of the high risk and high costs involved. The listing on a private exchange is a gamble by the company because the likelihood of selling at a good price is not as high as it would be on a national exchange.
Investors should know that the New York Stock Exchange is not the only place that the company will be listing its stock. The company is also planning on having its IPO listed on the Pink Sheets, a sort of online stock exchange. If the business does well and receives enough investors interested in it, the shares will become tradeable between investors. At that point, the shares will be priced and available to all consumers. It is still early to tell how successful the New York Stock Exchange listing will be for the company, but so far, it seems that it is a step in the right direction.
