Direct Investment Company Business Models: Trends & Strategies

Direct investment companies offer their stock directly to investors without the use of a broker. In most cases, this is offered to partial owners or share holders who work for the company and receive stock as part of a compensation package. Direct investments companies tend to follow a few similar trends in their business models.

Private Companies

Most direct investment companies are privately held. Publicly traded companies are subject to regulation by the SEC and other financial authorities, which typically require a licensed broker overseas the exchange of shares. Mutual funds, hedge funds or private equity groups with monies in excess of $100M may purchase stocks without the same level of advisement from a broker as they are considered institutional investors. All others are typically required to go through a broker.

Seek Investors Rather than Loans

Direct investment companies rarely go to loans when they need funds. Rather, they offer the opportunity for direct equity investment from another person. If that person is located out of the country, the practice is commonly called overseas direct investment. In all cases, the shares are bought without a broker and an exchange of equity takes place.