World News – CA – Enemies of Wall Street IPO ready to punch


NEW YORK (Reuters) – There have only been two direct listings on the New York Stock Exchange in the past two years There are about to be two more in one single day

Data analytics firm Palantir Technologies PLTR Software designer N and Workplace Asana Inc ASANN set to debut on the US stock market on Wednesday bypassing an Initial Public Offering (IPO)

The last direct listing was Slack Technologies Inc’s workplace messaging platformN debut in 2019, a year after the music streaming service Spotify Technology SA SPOTN went public without an IPO

This is a pivotal moment for some investors and business leaders who pushed to abandon investment banks as middlemen For years, they have criticized IPOs as beneficial deals that allowed bankers to allocate the most shares to their main clients

« Ever since the IPO process has existed, entrepreneurs and their investors have thought that bankers under-optimize themselves and take too much for themselves, » said Ben Narasin, partner at US capital firm. New Enterprise Associates risk

« If Palantir and Asana are successful, which they should be, more and more companies will seriously come back to looking for direct listings, » Narasin added

IPOs have been in tears this year, as companies participated in the stock rally that followed the coronavirus-induced crisis Companies launched nearly $ 50 billion in US IPOs until present in 2020, excluding IPOs of Special Purpose Acquisition Companies (SPAC) This has already passed the milestone for all of 2019 and is on track to be the busiest since 2014 and the second since 2000

In 2020, the share price of a newly listed company rose an average of 38% on the first day of trading, according to IPOScoop data and Reuters calculations

This has fueled further criticism among investors snubbed by investment banks that underwrite IPOs, as well as suspicion among some companies that bankers are leaving money on the table when they go public. to help create a ‘pop’ of day one trading

Phil Hellmuth, an angel investor in technology and poker player with more than $ 20 million in career earnings, said in an interview that he attempted to buy $ 500,000 in stock in the company. Snowflake Inc SNOW data warehouseN during his $ 3.36 billion IPOs earlier this month

Hellmuth knocked on the doors of four hedge funds, Silicon Valley acquaintances, Fidelity mutual fund, and one of the banks underwriting the Snowflake listing, but failed to get into what was the biggest IPO of this year As a result, he missed the game when Snowflake’s shares more than doubled in his debut

« If I can’t get a coin, the average investor has no chance of getting one, » Hellmuth said

Snowflake CEO Frank Slootman told Reuters he has no regrets about how the company’s IPO went

Fidelity said it was not possible to determine why an investor was unable to participate in an IPO without knowing the client details

In a direct listing, no shares are sold in advance, as is the case with IPOs The price of the company’s stock when it first starts on the market is determined by orders going public

The downside is that the companies involved cannot raise funds, although the NYSE and Nasdaq have asked US regulators to allow them to change their rules to allow companies to sell new shares during a direct quotation

This inability to raise funds has so far dampened the enthusiasm for direct listings of many cash-hungry companies, especially during the economic downturn caused by the pandemic

« I think we were going to see more direct listings this year, but for COVID-19 Many companies that were considering a direct listing have moved to an IPO for the capital increase aspect, » said Ran Ben-Tzur, Financial Markets Lawyer at Fenwick & West LLP

Palantir will also be the first direct listing where the majority of shares can only be sold after the company reports its 2020 results early next year.These lock-up deals are standard in IPOs, but have so far been absent from direct listings and may lead a business to achieve a higher valuation

« Banks did the math on the impact of not having lock-up deals in a traditional IPO and believe that without a lock-in structure, a company will not be able to grow to a valuation level as high as there is no shortage of stocks, ”said Ben-Tzur

For Asana, whose investors will not be subject to any blocking restrictions, one of the reasons the company was drawn into a direct listing was the desire for a more equitable way to price shares, according to a person familiar with the subject

Kevin Hartz, who took over the event ticketing company he co-founded, Eventbrite Inc EBN, which went public during an IPO two years ago, said in an interview that more and more companies are considering other ways to go public, including direct listings looking for a better price discovery process

« It is always a very interrupted process for new issues like the IPO of Snowflake By undervaluing it resulted in significant dilution This is not an optimal outcome for the company or for them existing investors, ”Hartz said

Palantir and Asana hired banks to provide financial advice for their direct listings On direct listings made to date, a small group of banks have shared a smaller pot of fees

For its 2019 listing, Slack, which was worth around $ 23 billion when it started operating, is expected to pay $ 221 million fees to three financial advisers By comparison, 26 banks earned $ 85 million in commissions during Snap Inc SNAP’s IPO in 2017N, which was worth around $ 31 billion at the time of its listing public

Reporting by Joshua Franklin and Krystal Hu in New York and Anirban Sen in Bangalore; Editing by Greg Roumeliotis and Lisa Shumaker

All quotes have been delayed by at least 15 minutes See here for a full list of exchanges and delays

Palantir Technologies, IPO, Asana, Exchange, New York Stock Exchange

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