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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

#71

Post by jiveturkey »

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…

> if they followed a traditional IPO the wouldn't have gone public at the same price but had a bank to back stop their share price at that level.

TFA:

> At Spotify, we chose more of a free market approach.

and

> we didn’t need to raise capital to fund our growth.

These are the 2 key points that people are going to miss. The reason to use a bank to underwrite your IPO (and make the market) is to backstop the price. The company isn't "leaving money on the table" when they price "too low" and miss the first day pop. They are buying insurance against internal pricing error.

I would like to see an independent analysis, not a supporting article from the CFO of the company that could afford the risk.

Please excuse me if my own armchair look at it is hopelessly naive.

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

#72

Post by gibybo »

JamesBarney wrote: post #70
eldavido wrote: post #56

Earlier quoted context omitted.

Yes and no. I read in Brealey-Myers [1] that you can get 80-90% of the way to pure beta (market risk) by picking 15-20 stocks. You just have to pick ones that aren't super correlated, e.g. 10 pharmaceutical companies. Whether it's worth your time messing about with this is a separate matter entirely. [1] https://www.amazon.com/Principles-Corporate-Finance-Richard-...

>Whether it's worth your time messing about with this is a separate matter entirely. Yeah, transaction fees can really eat into your gains unless you're a very good picked or are interesting millions.

>Yeah, transaction fees can really eat into your gains unless you're a very good picked or are interesting millions.

Buying 20 stocks would only cost you ~$120 (at $6/trade). For a $100k portfolio, that's an expense ratio of only 0.12% if you did it once per year.

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

#73

Post by ericd »

JamesBarney wrote: post #70
eldavido wrote: post #56

Earlier quoted context omitted.

Yes and no. I read in Brealey-Myers [1] that you can get 80-90% of the way to pure beta (market risk) by picking 15-20 stocks. You just have to pick ones that aren't super correlated, e.g. 10 pharmaceutical companies. Whether it's worth your time messing about with this is a separate matter entirely. [1] https://www.amazon.com/Principles-Corporate-Finance-Richard-...

>Whether it's worth your time messing about with this is a separate matter entirely. Yeah, transaction fees can really eat into your gains unless you're a very good picked or are interesting millions.

Eh these are trending to zero pretty quickly, and with buy and hold plus yearly rebalancing, you're not really doing that many transactions anyway.

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

#74

Post by gibybo »

hndl wrote: post #65
tehlike wrote: post #37

Earlier quoted context omitted.

Having shares of a private company is still possible with retirement accounts. It is a bit more work. You can roll an ira to an self-directed ira and invest in all sorts of financial instruments including real estate.

Can you share some resources here (e.g., services you've used)?

EDIT: Oops I misunderstood tehlike and had a comment about 401k -> IRA rollovers here which wasn't actually relevant.

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

#75

Post by iakh »

gibybo wrote: post #74
hndl wrote: post #65

Earlier quoted context omitted.

Can you share some resources here (e.g., services you've used)?

EDIT: Oops I misunderstood tehlike and had a comment about 401k -> IRA rollovers here which wasn't actually relevant.

Self directed IRAs are fairly specialized and are not offered by most brokerages. They also generally cost several hundred in annual fees just to maintain the account, regardless of usage.

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

#76

Post by ArtWomb »

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…

My understanding is the underwriters during the IPO process ensure a certain threshold of sales by shopping around to their institutional clients. For which services they charge a handsome fee.

Therefore being a household name in consumer internet or media space will help enormously if one chooses a direct listing. Uber or Pinterest would expect quite a pop day one. Whereas more bleeding edge names such as Docker or Ginko Bioworks may be required to do a PR push to educate the retail investor.

Best of luck ;)

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

#77

Post by notyourwork »

iakh wrote: post #75
gibybo wrote: post #74

Earlier quoted context omitted.

EDIT: Oops I misunderstood tehlike and had a comment about 401k -> IRA rollovers here which wasn't actually relevant.

Self directed IRAs are fairly specialized and are not offered by most brokerages. They also generally cost several hundred in annual fees just to maintain the account, regardless of usage.

That’s not true at all, fidelity is self managed and free aside from selling or stock. I’ve managed my own Roth and traditional Ira for years this way.

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

#78

Post by syedkarim »

tehlike wrote: post #37
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…

Having shares of a private company is still possible with retirement accounts. It is a bit more work. You can roll an ira to an self-directed ira and invest in all sorts of financial instruments including real estate.

Maverick401k simplifies the process of setting up a Solo 401k.

http://learn.maverick401k.com/investing/private-business-inv...

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

#79

Post by s73v3r_ »

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…

Someone who works for a startup has already been "investing" in their company for over 3-6 months by the time the company gets to IPO. I find it quite unconscionable that they should be prevented from realizing the fruits of their labor.

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

#80

Post by gibybo »

iakh wrote: post #75
gibybo wrote: post #74

Earlier quoted context omitted.

EDIT: Oops I misunderstood tehlike and had a comment about 401k -> IRA rollovers here which wasn't actually relevant.

Self directed IRAs are fairly specialized and are not offered by most brokerages. They also generally cost several hundred in annual fees just to maintain the account, regardless of usage.

Sorry, you're right, I misunderstood.
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