DPO: Acronym for direct public offering, a form of business financing “that enables a company to issue stock directly to investors without using a broker or underwriter as an intermediary and avoid many of the costs associated with ‘going public’ through an initial public offering (IPO).” (Source: eNotes, Encyclopedia of Small Business.) Also spelled D.P.O.
An article by Amy Cortese in the New York Times business section on August 1, 2013, notes that DPOs are sometimes called “do-it-yourself I.P.O.’s.” The article centers on Braham Ahmadi, the founder of People’s Community Market in Oakland, who had unsuccessfully tried to raise $1.2 million from angel investors, social investors, and private equity firms. His lawyer suggested a DPO as an alternative. Since November 2012, when the business introduced the offering, Ahmadi “has raised more than $630,000 from more than 150 mostly unaccredited investors — and potential customers.”
Cortese explains one of the primary benefits of a DPO:
[C]utting out the middleman and streamlining the process lowers the cost considerably. A direct offering might cost around $25,000 in legal fees, while a formal initial public offering can cost $1 million or more. That makes direct offerings an increasingly attractive option for companies that need a substantial amount of capital — typically between $500,000 and $5 million — but not enough to justify the cost of an initial public offering.
The U.S. Securities and Exchange Commission made DPOs available to small businesses in 1976; the rules were simplified in 1989, and direct online public offerings emerged in the late 1990s. Several websites specialize in assisting business owners with DPOs.
Direct offerings are especially popular with food companies, Cortese writes. An early and well-publicized DPO took place in 1984, when the ice-cream company Ben & Jerry’s raised $750,000 from 1,800 fellow Vermonters, “allowing them to build a new plant and expand, and setting the stage for a $5.8 million offering the following year.”
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