Invest Like the Best with Patrick O'Shaughnessy

Bill Gurley – Direct Listing vs. IPO - [Invest Like the Best, EP.144]

Sep 24, 2019

Join Bill Gurley, general partner at Benchmark Capital and expert on IPOs, as he delves into the heated debate between traditional IPOs and direct listings. He shares insights on the outdated complexities of the IPO process and how they lead to financial losses for companies. Gurley argues for the efficiency and transparency of direct listings, highlighting their benefits for retail investors. The discussion also touches on the courage needed for founders to choose direct listings and the changing landscape of capital raising.

48:58

Creator website

Episode guests

Bill Gurley

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Episode notes

Intro

4min

Navigating the IPO Maze

21min

Navigating the Complexities of IPOs and Shareholder Responsibilities

2min

Navigating the Nuances of IPOs and Direct Listings

4min

Revolutionizing Public Offerings: Direct Listings vs. Traditional IPOs

12min

Challenges of Buy-Side Firms in IPO Allocations

3min

Navigating the Shift: Direct Listings and the Role of Courage

4min

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