Last Act of Defiance


Venture investors have been promoting the concept of Direct Listings as an alternative to the Initial Public Offering (IPO). The sudden interest in Direct Listings harkens back to the first Internet Bubble in the ‘90s when venture investors began espousing the benefits of taking companies public on London’s AIM rather than the NASD. Funny thing is that interest in the AIM pretty much coincided with the beginning of the end of the crazy bull market for Internet stocks.

But I’m sure it’s different this time.

There is a belief among some investors that “the timeline, order of operations, and mechanisms of going public need to change” which is why Direct Listings are needed. You see the rules for IPOs were established about a century ago and have not kept pace with many of the trends and changes in today’s capital markets. (Bullshittake!!!). Ice cream has been made the same way for centuries. Just because you’ve gone dairy free doesn’t mean that the recipe and process needs to change to suit your needs and desires. Perhaps the biggest issue with Direct Listings are the timing and the source of interest in them.

One argument is that a Direct Listing is a better way to set a true market price. (You can read more about it here and here) However, one really big difference between and IPO and a Direct Listing is that the company actually doesn’t sell at stock. It is a way for investors and insiders to get liquid without a six month lockup. What could possibly go wrong?

This is looking to me like a last act of defiance by investors and founders before the bubble pops once again. Remember that unicorns are fantasy. If you think you see one it is really a jackass painted white, sprinkled with glitter, with a carrot glued to its forehead. Caveat Emptor!