IPO – The Other Ways to Get There (and Why They Usually Aren’t the Best Choice)

In my prior post I made the case that, in most situations, a traditional underwritten IPO is the best path to becoming a public company. That does not mean it is the only path. There are several other ways to end up public in the U.S. markets, and as a CFO you need to understand them well enough to evaluate whether they are genuinely better for your company—or simply more tempting in the moment.

What follows is not a legal or structural deep dive. Law firms do that very well. This is a CFO’s view of the tradeoffs.

Direct Listings

Direct listings get a lot of attention, largely because they avoid underwriting fees and feel more “modern.” In practice, they are only viable for a very narrow set of companies.

A direct listing works best when a company already has strong brand recognition, a large and diversified shareholder base, ample liquidity, and no need to raise primary capital at the time of listing. In other words, the market already knows the company well and wants the stock.

For most companies considering going public, those conditions simply do not exist. Without underwriters driving the process, building demand, and helping establish an orderly market, the risks around price discovery and early trading volatility increase materially. That doesn’t make direct listings bad—it just makes them inappropriate for the vast majority of IPO candidates.

Reverse Mergers and SPACs

Reverse mergers, including de-SPAC transactions, solve one problem extremely well: certainty.

You know you are getting public. You know when. You know the structure. You are not dependent on an IPO window being open three months from now. From a CFO perspective, that certainty can be very appealing, especially after living through aborted IPO attempts.

Another advantage is that you typically do not file a traditional IPO S-1. While disclosures are still extensive, the path is different and often faster.

Those benefits, however, come with meaningful tradeoffs.

The biggest issue I have seen is the absence—or weakness—of the traditional banking ecosystem around the transaction. Without a strong underwriting syndicate, you often lack coordinated sales coverage, aftermarket support, and high-quality analyst research. That can lead to thin trading, poor liquidity, and valuations that fail to reflect the company’s fundamentals.

SPAC structures also tend to carry costs that are easy to underestimate. Dilution from sponsor promotes, warrants, PIPE discounts, and redemptions can be substantial. While underwriting fees may look lower on the surface, the all-in cost of capital is often higher than it first appears.

Reverse mergers are not inherently bad, but they trade IPO execution risk for post-transaction market risk—and that trade is not always obvious at the outset.

ADRs / ADSs

ADRs and ADSs are primarily tools for companies that are already public outside the U.S. They are mechanisms to package foreign shares into a U.S.-compliant instrument.

They are not, in practice, an IPO alternative for a private company deciding whether to go public. For that reason, they are usually a footnote in this discussion rather than a core option.

Spin-Offs

Spin-offs are a different animal entirely and typically apply only when you are already part of a public company.

There are two primary ways to execute them. One is selling shares of the subsidiary into the public market, effectively raising capital. The other is distributing shares to existing shareholders of the parent company.

Each approach has very different implications for capital structure, investor base, tax treatment, and management incentives. From a CFO standpoint, spin-offs are less about “going public” and more about capital allocation, strategic focus, and value realization. They can work extremely well, but only in very specific circumstances.

The CFO Lens

All of these alternatives exist for a reason, and in certain situations they are the right answer. What they generally do not do is eliminate risk—they simply move it around.

The traditional IPO concentrates risk upfront in execution and timing, but it also brings structure, market education, analyst coverage, and tools to manage early trading. Many alternative paths reduce upfront uncertainty while increasing long-term market and valuation risk.

As a CFO, your job is not to chase novelty or certainty alone. It is to understand which risks you are taking, which ones you are transferring, and whether the resulting public company is actually stronger five years down the road.

In the next post, I’ll tie these structural choices back to what actually happens during an IPO process—and what most people outside the room never see.