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IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

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Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#21

Post by aqme28 »

chollida1 wrote: post #12
btilly wrote: post #10

Earlier quoted context omitted.

This was listed as, I think, a positive but I see it as an extreme negative. Why invest in your company if you don't have the conviction that it will be worth more 3-6 months from now. You are thinking as a potential new investor, and your interests are not aligned with employees and early investors. Employees and early investors have had what is likely to be a large fraction of their net worth tied up in one company…

Maybe I wasn't clear but I don't think I ever setup the straw man you knocked down saying an employee shouldn't ever be able to sell. All I said was its very reasonable, as evidenced by the fact that every IPO over the past 40 years has had a lockup, to have a 3-6 month hold period for existing share holders when you go public. That's it. I( and GOOG, FB, AMZN, SNAP, and the rest of the entire tech community that wen…

If you're worried about employees unloading shares and tanking the price, then hold off for a few days and buy the stock at a discount.

Historical use of a lockup isn't a reason to continue doing them.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#22

Post by wildmusings »

zaksoup wrote: post #18
wildmusings wrote: post #16

Earlier quoted context omitted.

The whole point of owning part of a company is to collect dividends and/or sell your shares for more than you bought them for. But without going public, it can be difficult to do the latter.

This doesn't seem true. What about having voting rights on board members/company direction? How do worker-owned co-ops even function if this is the 'whole point of owning part of a company'. Why do we take 'maximize shareholder value' as though it's some rule handed down by god and the only possible way to operate a company, public or otherwise? It just isn't the case.

You don’t just control a company for fun. I mean, maybe you do and more power to you, but just about everyone else votes in those elections so that the company will be better run, so that in the short/medium/long-run dividends or share price will go up.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#23

Post by cgb223 »

yourapostasy wrote: post #13
whatever1 wrote: post #8

Honesty I don't get why a company has to go public and gamble its future on a herd of people that they have no clue about the business and just try to make profit out of you based on speculation. Stay private and get loans. At least loan rates will not change by 1000% overnight based on some nonsense that someone wrote on his Twitter.

I imagine there has to be a significant enough scaling difference between the capital raised by IPOs, which is a one-time event, and subsequent cash returns to shareholders in various forms, which can be characterized as interest payments on that one-time liquidity event (absent subsequent share issuances to keep this description simple) that never ends , versus a loan-then-repayment or bond issuance-then-repayment,…

100% agreed with this

In addition to that, coming form a private equity holders perspective, its a way for some of us to cash out on the general market. If I had a big stake in a private company, maybe I can only sell my options every 6 months, if my company is kind enough to set that up.

If there's an IPO I can sell my stake at what is probably a higher market value than the internal price and cash out all at once (or over time)

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#24

Post by stanleydrew »

chollida1 wrote: post #3

The banks backing spotify made about as much from their "non IPO" compared to what they would have made from a traditional IPO so I don't think too many bulge bracket banks are worried about this trend. https://www.bloomberg.com/news/articles/2018-03-26/spotify-l... > Avoiding the lock-up period was a very important part of our decision to list Spotify directly, but there were also clear financial benefits. This was…

>> Avoiding the lock-up period was a very important part of our decision to list Spotify directly, but there were also clear financial benefits.

> This was listed as, I think, a positive but I see it as an extreme negative. Why invest in your company if you don't have the conviction that it will be worth more 3-6 months from now.

This is silly. You could make the same statement judging employees for selling at any arbitrary point in time. So why not lock them up for a year? Why not two?

Founders and executives of very successful private companies sell shares during Series B and later rounds, and yet the new investors in those rounds are willing to buy them at close. Are those new investors fools to pay off founders without conviction?

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#25

Post by khuey »

yourapostasy wrote: post #13
whatever1 wrote: post #8

Honesty I don't get why a company has to go public and gamble its future on a herd of people that they have no clue about the business and just try to make profit out of you based on speculation. Stay private and get loans. At least loan rates will not change by 1000% overnight based on some nonsense that someone wrote on his Twitter.

I imagine there has to be a significant enough scaling difference between the capital raised by IPOs, which is a one-time event, and subsequent cash returns to shareholders in various forms, which can be characterized as interest payments on that one-time liquidity event (absent subsequent share issuances to keep this description simple) that never ends , versus a loan-then-repayment or bond issuance-then-repayment,…

The obvious upside to an IPO vs a debt issuance is that an IPO allows the existing owners to trade shares for cash too.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#26

Post by stealthmodeclan »

whatever1 wrote: post #8

Honesty I don't get why a company has to go public and gamble its future on a herd of people that they have no clue about the business and just try to make profit out of you based on speculation. Stay private and get loans. At least loan rates will not change by 1000% overnight based on some nonsense that someone wrote on his Twitter.

> Stay private and get loans

What if they got stuck in some scandal? IPO is also a way to shield the company from action of an evil executive.

If some politician has a beef with a private business, they can potentially cause them enormous loss.

But no politician would like to take some action which might cause public losing money because of the fear of losing their support through votes.

Not only this, it's also a feedback mechanism. A company exceeds quarterly expectations, more people jump to buy their shares as a result executives sell and profit. And large companies will have projects which might take long to profit, but they can be immediately judged on their next move post IPO. How will this work in a private company?

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#27

Post by gwbas1c »

beavisthegenius wrote: post #9
Legogris wrote: post #5

Earlier quoted context omitted.

...In which case you as an investor should be even less concerned with lock-in over 3-6 months.

It's to reward employees who may need to sell stock based compensation to pay bills and other things that require currency.

> It's to reward employees who may need to sell stock based compensation to pay bills and other things that require currency.

Don't spend money before you have it.

On the other hand, equity is worthless until it's fungible. Fungibility problems turn into retention problems. Otherwise, the company has to pay large bonuses to key employees who may decide to cut their losses.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#28

Post by will_brown »

chollida1 wrote: post #3

The banks backing spotify made about as much from their "non IPO" compared to what they would have made from a traditional IPO so I don't think too many bulge bracket banks are worried about this trend. https://www.bloomberg.com/news/articles/2018-03-26/spotify-l... > Avoiding the lock-up period was a very important part of our decision to list Spotify directly, but there were also clear financial benefits. This was…

Interesting article you posted. I’d never stopped to wonder the investment bank fees for underwriting an IPO and I expected millions but ~$50M was unexpected.

Not to be that guy on HN but it would seem this is the area should leverage blockchain to do a public offering (ICO for equity) and show how blockchain/tokens could be used to cut out the investment banks and save a company $50M on a public offering.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#29

Post by jjuhl »

rayhano wrote: post #20

I posted this article because we’re planning to do the same and wanted to gather thoughts from the tech community (the financial community has commented on this sufficiently to help inform our process). I thought it might help to share our motivations for eventually listing our company vs taking more VC: a. The public markets force transparency. This aligns with our values. b. Governance enforced by VCs (especially i…

Why are you trying to provide "reasons"? You'r a company. You just want to make the maximum amount of money. Everyone knows this. Why try to pretend anything else?

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#30

Post by erispoe »

rayhano wrote: post #20

I posted this article because we’re planning to do the same and wanted to gather thoughts from the tech community (the financial community has commented on this sufficiently to help inform our process). I thought it might help to share our motivations for eventually listing our company vs taking more VC: a. The public markets force transparency. This aligns with our values. b. Governance enforced by VCs (especially i…

> e. Friends and family and supporters can participate - especially from their retirement accounts. This is really important - the wealth creation being broad has a real good-news feel. Sharing the wealth.

It's a really bad idea to do stock picking, or any other risky investment strategy, with your retirement account, and a really bad idea to promote it. One company goes bust and suddenly you lost your retirement savings. Or your parents did and you'll have to explain them why they'll have to continue working in their 70s and 80s.

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