Invest Like The Best
Episode 144 Direct Listing vs. IPO
Invest Like The Best

Episode 144: Direct Listing vs. IPO

Invest Like The Best

Episode 144

Direct Listing vs. IPO

Bill Gurley is a general partner at Benchmark Capital. We cover the mathematics behind IPO underpricing, the brokenness of the traditional IPO process, and how direct listings help solves some of these challenges.

[00:01:22] – (First Question) – His view on the IPO process

[00:05:42] – Will now be the turning point for IPO’s

[00:06:40] – The engagement between a new company going public and their counterparty and the IPO process

[00:13:38] – The math of capital costs

[00:18:18] – Banks that underprice the IPO’s

[00:20:45] – The psychology of IPO’s

[00:23:14] – The pop in the IPO and the media

[00:24:54] – The value that shareholders give vs VC’s

[00:25:37] – The Green Shoots

[00:28:17] – The lock-up

[00:31:40] – Direct listings vs IPO’s

[00:36:07] – Spotify’s CEO Reveals Why He’s Not Doing a Traditional IPO

[00:38:23] – The capital raised in an IPO and diluting the company

[00:40:18] – Privilege access and buy-side firms

[00:43:33] – What will actually lead to changes in the IPO space

[00:44:48] – Why he became so interested in the IPO space

Direct Listing vs. IPO

Introduction

Patrick
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 investment community in recent months. The comparison between bringing a company public through a traditional IPO and what's known as a direct listing. 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, which I'll link in the show notes. Now, please enjoy my very interesting conversation with Bill Gurley.

The IPO Process and Its Weaknesses

Bill, we're going to tackle a single issue on the podcast, which I think the first time that we've done that and a fun framing for introducing what this issue is, is the Warren Buffet idea that if you're at a poker table and you don't know who the patsy is, you're probably the patsy. Maybe you can begin by describing what the table is, what game is being played and who is the patsy.

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