Intro

This chapter explores the benefits of direct listings over traditional IPOs, discussing the evolving investment landscape. It offers insights into the mechanisms involved and the growing preference for direct listings among industry professionals.

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Episode notes

My guest this week is Bill Gurley, general partner at Benchmark Capital. Our conversation is about one specific issue that has popped up as a topic of interest in the investing community in recent months: the comparison between bringing a company public through a traditional IPO vs. what’s known as a direct listing.

As a third party observer with no real dog in the hunt (as we don’t buy IPOs at O’Shaughnessy Asset Management), I thought this was a small and nuanced issue. I’ve therefore been surprised by the strength of opinions on both sides of this issue as I’ve explored it behind the scenes this past week. It feels almost like I’ve encountered a political third rail, where one side throws a lot of vitriol towards the other.

To be clear, this episode is very much in favor of direct listings instead of traditional IPOs. For those that want a good discussion of the IPO process and its upsides, check out episode 173 of the Exponent podcast with Ben Thompson.

Now please enjoy my very interesting conversation with Bill Gurley

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Show Notes

1:22 - (First Question) – His view on the IPO process

5:42 – Will now be the turning point for IPO’s

6:40 – The engagement between a new company going public and their counterparty and the IPO process

13:38 – The math of capital costs

18:18 – Banks that underprice the IPO’s

20:45 – The psychology of IPO’s

23:14 – The pop in the IPO and the media