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#15 What happens in an IPO? (Part 2/2)
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Vivek here. Sorry for skipping the previous edition. One important thing before I proceed. There's no doubt about a mental health crisis affecting us all along with Covid. LonePack is an NGO doing some great work on this front. They recently launched a buddy app where you can anonymously talk about anything on your mind with trained volunteers. I will be grateful if you can spread the word about this.
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If you haven't read Part 1, I'd strongly suggest you read it before proceeding further. If you have read it, here's a quick recap of what happened:
Founder Lata and Investor Raj got the board's permission to prepare for TinyPanda's IPO
Banker Bala and 2 other investment banks were chosen to advise on the IPO
Post the IPO kick-off meeting, due diligence was done and the S-1 was prepared over 4 months.
Just one day before the S-1 was to be filed, Lata got an email that made her consider halting the IPO process.
Onto Part 2...
Emergency Board Meeting
There were 7 people seated in a conference room at the TinyPanda Office in pin-drop silence. It was late in the evening - an unusual hour for a board of directors meeting. Lata cleared her throat to break the silence and draw attention to herself. What she was going to say in the next 15 minutes were extremely important. It could change the course of TinyPanda's journey.
Earlier that day...
Lata had received an email from Guru, the founder and CEO of Gooli, making an offer to acquire TinyPanda. Gooli was a data storage company that sold its software to corporates. Like Dropbox or Google Drive, companies could store their data online on Gooli and pay based on the amount of data stored. Gooli was interested in acquiring TinyPanda, specifically their data compression algorithm, to make their offering more attractive to customers. While TinyPanda actually reduced the amount of data stored through compression, effectively cannibalizing the revenue of Gooli in the short term, it could help Gooli cut down prices and capture a larger market share than competitors in the long term.
Gooli Guru, as the tech industry called him, and his team had initiated the first acquisition conversation more than a year ago. Talks fell through as Raj, Lata and a few other investors felt TinyPanda was being undervalued. But this latest email from Guru offered 3 times more than what they were offering last time.
Lata was very clear that even a 3x higher offer did not make sense. TinyPanda could be a much bigger company if it continued to be independent. But TinyPanda wasn't a founder-led company anymore where she could single-handedly take the decision. She had to run this acquisition offer by the board of directors and then collectively decide to accept or reject the offer. Lata's only way ahead was to convince the board to choose an IPO over an acquisition.
There was another point that jumped at Lata. Tripling the offer seemed like a last-ditch attempt by Guru to acquire TinyPanda. This meant Guru had somehow caught wind of TinyPanda's IPO plans even though it was not yet public. Someone within the 'working group' had leaked the news to Guru. But Lata couldn't do much about the leak. At least not at this moment. There were more pressing matters at hand.
The email also meant Guru knew they are planning to file the S-1 tomorrow. If Lata pushed the date of the S-1 filing by even a day, Guru will know TinyPanda is considering the acquisition offer. And he might offer more attractive valuations making her job of convincing the board for an IPO tougher. Lata had to call for a board meeting today!
Typically if Lata had requested the board members for a meeting with just 6 hours notice, it would never have happened. But she knew when they heard the reason for today's meeting, they would make it. They had to.
Back to the present.
Lata had just finished giving a 15-minute passionate speech about why the best route ahead for TinyPanda was to IPO and not be acquired by Gooli. This was followed by a half-an-hour discussion and it was now time for the vote.
Lata had to get 4 of the 7 votes to win. She knew she already had 3 of them - her own vote, Raj's, and the other venture capitalist's votes. They had stuck with her all these years and believed in her larger vision. The problem was the remaining 4 board members. There were all independent directors hired recently.
Independent directors, typically business or industry experts, were members who weren't involved closely with the running of the business. A company adds independent directors on the board to give a more unbiased opinion on how the founders and executives were running the company and check for discrepancies in management. Lata and Raj had added these 4 independent directors over the last year as they prepared for the IPO. Having a majority of independent directors on the board (4 out of 7 here) sent a strong signal to investors ahead of the IPO that the company had proper checks in place to ensure there is no fraud (as discussed in part 1 - this is part of strengthening corporate governance before an IPO ).
As the voting began, Lata prayed that at least one of the independent directors voted in favour of an IPO.
Hello, Bala here. Did you miss me? Come on, don't act all cool. I know you did.
Quick trivia here. Swooping in and acquiring a company just before it IPOs is rare but has happened a few times. A famous example being Cisco's acquisition of AppDynamics just before it could IPO in 2017. Literally just before it IPO-ed. The acquisition was finalized and announced just one day before AppDynamic's shares were supposed to start trading.
In fact, a few companies follow a 'dual-track process' where the investment banks are helping the company prepare for an IPO while in parallel, they are also looking for potential acquirers. AppDynamics was not a dual-track process but they still chose an acquisition over an IPO when the offer came along.
Step 6: Filing the S-1
It was late in the evening and Lata seemed a bit relaxed. The S-1 had gone out a few hours ago as originally scheduled. A few leading media outlets had already picked up the news. It was still too early but the reception had been positive.
The IPO schedule was back on track after the board vote last evening had gone better than expected. 2 of the independent directors had voted in favour of an IPO giving her a total of 5 votes out of 7. There was no email from Gooli Guru but she knew he would be fuming in his office, figuring out another devious way to stop the IPO.
Now that the S-1 had been filed, the 20-day cooling-off period (30 days in India where you file with SEBI) had begun. The regulator would use this time to check the S-1 before permitting the IPO to move ahead.
During this period, Lata and the banking team would have to be on standby, ready to submit any additional information the regulator might ask.
Few additional points about the timeline.
Typically, Lata and her team have to respond to the regulator within 1-2 days and file the new information under the heading 'S-1 Amendments'. An important point to note here is that SEC/SEBI only checks if any key piece of information is missing in the S-1. They don't check for the factual accuracy of the information submitted. That check would have happened in the due diligence phase earlier in the process.
This 20 day period is also the minimum. Sometimes, the back and forth between the company and SEC could take longer.
Also, the company need not start the roadshow right after the approval is received for various reasons - the holiday season, sudden events like covid, market sentiment changes, etc. Although, it is advisable to start immediately.
Step 7: Pre-deal Investor Education (PDIE)
The next few weeks were going to be hectic for Bala. During the cool-off period, the company (ie, Founder Lata and the other executives) was prohibited from advertising the shares of TinyPanda to any potential investors and collecting orders for the same. However, the bankers were allowed to talk to potential investors and try to judge interest. This step is called the "Pre-deal investor education" or PDIE.
For this reason, Bala had asked the equity research analysts (the ones who wrote the ICRs) of all the 3 advising banks to assemble. A small equity sales team (2-4 people from the sales & trading division of the investment bank) were also to join in. Like the equity research team, the equity sales team had been crossed over the Chinese Wall by Bala after taking permission from JP Murugan's compliance team.
If you notice, 3 divisions of the investment banks are now fully involved in the IPO process. As mentioned in Part 1, this is why bulge bracket banks are preferred as lead advisors.
Bala had gotten the syndicate team (another team within the investment banking division) to prepare a list of potential institutional investors who would be interested in this IPO. The syndicate team were the investor facing side of the investment banking division. They regularly kept in touch with institutional investors and had in-depth profiles of them - who bought which recent IPO, are they the ones who place large orders, which sectors are they focused on, etc.
Over the next 2 weeks, the equity research analysts would have face to face meetings with a few of the institutional investors on this list and answer any questions the investors had about the company after reading the S-1 (which was public now). Bala's team had already prepared the detailed day-to-day schedule for each of these research analysts. Each analyst would meet a different investor so maximum ground can be covered.
In parallel, the equity sales team will follow up with these investors after the meetings to ask what they thought about the company and collect indications of interest (IoIs). IoIs aren't binding, ie, the investor can later say they are not interested anymore. But they are helpful for the banks to judge if there is enough interest among investors to buy shares in the IPO.
Another important bit of information collected from investors at this point is their valuation of the company. The indicative valuations from all these investors are aggregated by Bala's team and compared with the valuation that the bankers themselves had calculated. They then arrive at a middle ground and come up with a valuation range.
At the end of PDIE
After inputs from 2 weeks of PDIE, Bala's team arrived at a valuation range of $3.9 to $4.5 billion for TinyPanda.
The next step was to finalize how many shares would be offered in the IPO. Bala had to balance multiple interests here.
One was to meet the criteria of the stock exchange which typically revolve around 2 parameters. One - to ensure enough shares are listed (so that enough trading can happen). Two - to ensure the market value of the shares is high enough so that only decently large companies are listed. The NYSE, where TinyPanda planned to list, needed a minimum of 1.1 million shares to be listed with a collective market value of at least $100 million. (The BSE in India needs the shares offered in IPO to be valued at a minimum of ₹10 crores and the company's overall valuation to be at least ₹25 crores).
Every stock exchange has its own set of eligibility criteria for listing. It is also possible for a company to list on 2 stock exchanges in an IPO. In that case, it has to ensure it meets the listing criteria of both exchanges. Also, these stock exchanges can be in 2 different countries as well.
Another was to meet the demands of all TinyPanda investors who wanted to sell their shares in the IPO. Like Raj, VCs who invested early usually want to sell most or all of their shares. Later stage investors (either VC or private equity) and the founders will sell only a small part of their shares. In fact, it can send out a wrong signal to the market if founders and late-stage investors sell a lot of their shares in an IPO - that there's something wrong with the business and the people running/owning it are dumping their shares. Bala also had to take into consideration the shares a few employees might want to sell in the IPO.
The third interest Bala had to keep in mind was if TinyPanda wanted to issue any new shares in the IPO. The money from selling these shares would not go to any investor. It would go into the company's coffers to be used for growing the business. It was advisable to have at least a small % of the shares as new shares as a signal to the market that this IPO was not just about investors exiting the company.
Lata, Raj and the other investors already had a fair idea of how much % of their shares they wanted to sell. It was basis this along with their own valuation of TinyPanda that they decided 3 banks were enough to advise on the IPO. Bala just had to sit down with all of them and finalize the exact number. And he did that on the last of PDIE. In a meeting of the founder, investors and bankers, the following was decided.
TinyPanda currently had 30 million shares. 20% of them (6 million secondary shares) would be sold in the IPO. And another 1 million fresh shares (or primary shares) would be offered in the IPO, the money from which, will go towards helping TinyPanda grow even faster.
So the end result would be 31 million total shares of TinyPanda. And 7 million of them (22.5% of the company) will be listed on the stock exchange (these 7M shares are called free-float shares).
The valuation range of $3.9 to $4.5 billion divided by 31 million shares translated to a price range of $125 to $145 per share. And the expected IPO size would be in the range of $875M - $1B (7M shares multiplied by price range).
The standard lock-up of 180 days would apply to everyone. This meant anyone investor or founder selling their shares in this IPO could not sell any more of their shares for the next 180 days. This clause is a standard in all IPOs, again, to ensure someone does not go dumping all their shares in quick instalments over the next few weeks. Something that could send a negative signal to the market.
"Great! The S-1 will be updated with these numbers and the next stage could begin", Lata thought to herself, silently glad the meeting had ended. To her, selling her own shares was not fun to discuss. But her train of thought was broken by Bala who was saying
"One last thing. We'll keep the greenshoe at the standard 15%"
"Sure. I mean, do we have a choice?" Lata laughed and left the room.
Hey hey hey, Bala here. Time for an interesting topic - the greenshoe option.
And to understand this, we first need to understand the concept of 'underwriting' which means the act of taking on someone else's risk. So when an insurer sells you an insurance policy, they agree to cover for you when a 'risk' occurs (death in case of life insurance). Hence, they have underwritten you.
In the case of an IPO, the bankers don't just act as advisors but also underwriters. So when we say TinyPanda is offering 7 million shares in its IPO to investors, what is effectively happening behind the scenes is the bankers (3 banks in this case) are buying the 7 million shares from TinyPanda and selling it to investors. Bankers then collect the money from investors, take their cut (2-5% as explained in Part 1) and pass the rest on to TinyPanda.
We wankers, sorry, bankers do this as a way to show our clients that we are committed to selling every share in the IPO to the best of our abilities. Because if we don't, we suffer the loss.
Now coming to the greenshoe. Once a share starts trading on the stock exchange, if it falls below the IPO price, the SEC and SEBI actually allow the bankers to intervene and stop the share price from falling. Bankers do this by buying the said shares, thus increasing demand and stopping the price from falling further. It's like gaming the stock market but legal. But they can't do it whenever they want. They can only do it during the 30 day period after the share lists. This price stabilization mechanism is called greenshoe.
How does it work exactly?
Let's continue TinyPanda's example. There are 7M shares on offer in the IPO. This means the bankers are buying 7M shares from TinyPanda's shareholders and selling them to the IPO investors. The bankers then decide to sell additional shares, over and above these 7M shares - these are the shares they will buy back later if the trading price falls below IPO price. SEC/SEBI allow for the size of this additional lot to be 15% of the normal offering. So in TinyPanda's case, 1.05 million greenshoe shares (15% x 7M shares).
But where will the bankers get these additional 1.05M shares? They borrow (not buy) them from some of the existing investors who still have some shares left in the company even after the IPO. Bankers then sell all these 8.05M shares (7M + 1.05M) in the IPO at offer price, let's say, $150. This process is nothing but allocation and is explained later in the story.
The money received from these 1.05M shares is kept in a separate account. To the IPO investor, it doesn't matter whether they are getting a normal share or a greenshoe share. It's all the same to them. Once the share starts trading, there are 2 scenarios.
Scenario 1: Share price goes above $150
If the share price largely stays above $150 in the next 30 days, the bankers don't need to use the greenshoe. In this case, the money in the separate account is transferred to the investors whose shares they borrowed. And their shares are marked as 'sold' in the IPO.
Scenario 2: Share price goes below $150
Imagine the share price drops to $120 and continues falling. Bankers use the money in the separate account to start buying back shares. As they keep placing orders at increasing prices, they hope the price fall will stop and slowly bounce back. If they buy back all the 1.05M shares, they return them to the shareholders they originally borrowed them from. Since they bought these 1.05M shares at a lower price than $150 (which they received for the shares), any remaining amount in this account can be kept by the bank as profit. If they ended up buying only part of the shares before the price got stabilized and 30 days got over, only those bought back are returned and the remaining are marked as sold. Scenario 2 doesn't apply when the share price falls below $150 for a little time and then bounces back. It applies only when the price consistently stays below or keeps falling with time.
OK. Back to the story.
The S-1 was updated with the number of shares on offer (7M), greenshoe shares (1.05M), and the lock-up period. The only information missing in this version is the price at which the IPO shares will be offered (called, no prizes for guessing, "offer price"). Along with the S-1 update, a press release goes out announcing the price range for the IPO.
Step 8: Roadshow & Book-building
Lata took a deep breath and walked into the room. The roadshow booklets - printed versions of the 30 slides deck made by Bala's team - were already distributed to everyone present. Lata and her CFO spent the next hour presenting and answering questions to the team from one of the largest institutional investors in the US - BrownRock. Within 5 minutes of the meeting ending, she was in the car to her next meeting where the hour-long drill would repeat.
Lata was just 2 days into a 10-day roadshow and was already feeling completely exhausted. Speaking for an hour in 5 meetings every day was no joke. Add to this, the travel. Not just from one part of New York to another. She also had to fly to Boston and San Francisco for investor meetings.
The one thing that kept her going was the report that Bala's team sent her at the end of every day. It summarized the number of orders placed by investors till now and how much % of the IPO's shares were already subscribed.
You see, the book-building phase, where the bankers start accepting orders (or "building the order book"), had started concurrently with the roadshow and was going to last as long as the roadshow. After a roadshow meeting, institutional investors pinged the equity syndicate team with the number of shares they were interested in buying and at what price. And these orders were keyed into an application that bankers use to keep track of orders. Remember, at this stage, the orders are just collected. Allotment of these shares to investors happens later.
Also, the price at which orders came in had to be between the price range which would have been announced at the start of the roadshow, ie, $125-$145. And in a typical auction style, if an investor wants to increase their chances of getting the shares, they have to put in the order at a higher price. They can also keep revising orders (both the number of shares and price) until the book was closed. Given 2 days of the roadshow were already done, the book would close in 8 more days.
Orders could come in from any qualified institutional investor, whether they were met during the PDIE/Roadshow or not.
At the end of Day 2, TinyPanda's book had already crossed the 50% mark, ie, orders had been placed for more than 50% of the 8.05M shares. This was a very encouraging sign and showed that investors were very interested in the shares.
On Day 5, as Lata was in San Francisco meeting investors, she got a call from Bala with Raj conferenced in. The book had just crossed the 100% mark with most orders coming in at the upper end of the price range. Bala suggested they move the price range upwards to $145-$155, meaning the valuation would now be in the range of $4.5B-$4.7B Given the high demand, there was a good chance most investors would revise their orders to a higher price once the news of a price revision went out.
Lata did not have an objection obviously. This was excellent news. She smiled as she walked into her 3rd meeting of the day.
Step 9: Pricing & Allocation
Bala cleared his throat and then looked at himself in the washroom mirror. He had to speak a lot at tonight's meeting that was going to start in an hour. This was it. The entire IPO process boiled down to this one meeting.
Earlier in the evening, the 10-day roadshow had come to an end with Lata and her team meeting more than 40 institutional investors. There was a rush of orders in the last hour - a few investors adding more shares, a few of them increasing the price they were willing to pay - resulting in the book being subscribed 230%, ie, the demand was 2.3x times the number of shares on offer.
With the order book closed, it was now time for the allocation meeting that would run the entire night. Bala mentally ran through what he had to do in the meeting.
First, he had to finalize the offer price. This was the easy part. The orders received had to be sorted by price, from highest to lowest. Then the no. of shares from each row were added, starting from the top. The price in the row at which they reach a total of 8.05 million shares would be the offer price. The logic was, at this price, there were enough people willing to buy all the shares on offer.
Now for the tough part - allocation, ie, who gets how many shares. It never was "who bid the highest gets the shares". Bala. knew they had to consider the profile of the investor. There were largely two types of institutional investors → Long-only Funds (LO) and Hedge Funds (HF).
Long-only funds were investors who bought shares for the long term. They weren't the kind of people who bought and then sold immediately. Since they mostly only bought shares (buying a share is called 'going long' on the share), they were called long-only. Asset management companies like Vanguard and Fidelity in the US and a few mutual fund companies in India fall under this category. Even pension funds and insurance companies that have truckloads of money to manage for decades fall in this category. In India, LIC would fall in this category.
Hedge funds on the other hand are those interested in shares where they can make again as quickly as possible. They are speculators and typically try to take advantage of events like an IPO, merger, some major news, etc that could swing share prices. Citadel and Millenium are well-known names in the US.
Bala had to ensure a reasonable split between long-only funds and hedge funds. The reason being this - If all shares went to long-only funds, most wouldn't sell and the share would hardly trade on the stock exchange after listing. And if all shares went to hedge funds, there would be random buying and selling (because of the speculation) and the share would experience massive swings in price which is not good. Over time, bankers had figured out that allocating at least 60-70% of the shares to long-only funds and 30-40% to hedge funds was a well-balanced strategy that gave enough leeway for the shares to be traded (since many HFs would sell) but also ensure price stability (since many LOs would hold).
There was another interest Bala had to keep in mind. He had to ensure a few of his (or JP Murugan's) 'friendly' investors got the allocation they wanted. This was important because keeping them happy would ensure they would also place orders in future IPOs Bala would advise. Bala had to do this without making it obvious. The usual sell was 'that particular investor is a quality one - having them as a shareholder is a good signal to the rest of the market'. Usually, there wasn't a lot of convincing to do since the result would be the same for Lata, Raj, and the other VCs selling their shares in the IPO. All their shares would still be sold at the offer price and they would make quite a lot of money. But sometimes, there would be arguments if VCs like Raj and the other bankers on the IPO had some favourite institutional investors.
"Ok, this was going to be alright. After all, I have done this multiple times already", Bala thought as he made his way to the meeting room. Lata, Raj, and the other bankers on the IPO were already seated. This was going to be a long night.
In India, the IPO roadshow and allocation happen quite differently.
The roadshow happens and then the book is thrown open, unlike the US/UK/Europe where they both happen concurrently. Because of this, the book is also kept open for a shorter period - around 4-6 days.
The biggest difference is in how shares are allocated. In US/UK/Europe, all the shares on offer are allocated to institutional investors (LOs and HFs). Very rarely, a company explicitly decides to reserve a small % (usually 5%) for retail investors (you and me). Even then, most of the retail portion gets eaten up by super-rich people who have access to people who can help them get the allocation. There is a small change coming in the US though. Robinhood, an app that lets you buy/sell shares in the US, is working on bringing a small % of shares in US IPOs to retail investors.
In India, SEBI mandates that 35% of IPO's shares be reserved for retail investors (in the case of loss-making companies IPO-ing, the retail reservation is 10%). Another 15% goes to super-rich folks (who have to invest a minimum of ₹2 lakhs). And 50% is reserved for institutional investors (called qualified institutional investors or QIBs). While bankers and founders decide who gets the allocation in the institutional investor segment, they have no say in the retail investor segment. If the retail portion is over-subscribed, allocation happens on a lucky draw basis, ie, names are randomly selected and everyone is given equal numbers of shares. Because of this, the allocation also happens over a few days after the book is closed. Whereas in the US, the allocation happens the same night the book is closed.
As a retail investor, the more an IPO is oversubscribed, the lower your chances of getting an allotment. Also, if you didn't get allotted, there's actually still a chance you might have a piece of the IPO if one of the mutual funds you invest in or the insurance company you have a policy with have invested in the IPO via the institutional investor route.
Last point. If the book is not filled, the IPO is usually called off as the company is deemed not good enough to be a public company yet.
Step 10: Trading begins
The allocation meeting had gone smoothly the previous night. The IPO was priced at the top of the range ($155) making the IPO size $1.25B, among the largest that year. The SEC filing and press release about the final price and number of shares had gone out immediately late at night. The stage was set for the share 'TINY' to start trading today.
Founder Lata and a few members of TinyPanda's management, Raj and a few other VCs, Bala and a few other bankers were all assembled at the NYSE. In a few minutes, Lata would ring the bell to mark the opening of trading at the NYSE. This was a ceremony that IPO-ing companies typically did. It made for a good marketable and PR moment. It was Bala's idea and he had managed to reserve the slot for TinyPanda by paying a fee to NYSE.
Lata was excited and nervous at the same time. And surprisingly, it wasn't about all the cameras pointed at her face. It was about what price the TinyPanda shares would open at when the trading begins right after she rings the bell. The opening price could be higher (or lower) than the offer price ($155) based on how positively (or negatively) the market (the rest of the investors) viewed the company.
30 minutes after trading opened...
TinyPanda's share price was already 25% above the offer price and didn't seem to be slowing. Raj should have been happy given the positive reception but he wasn't. He looked at Bala and gave a forced smile. The bloody banker had once again managed to under-price the IPO. Typically, if the share price jumps very high compared to the offer price, it means the bankers could have decided on a higher offer price for the IPO but got too conservative. While the jump in share price is good for the company in general, it is seen as a loss by investors like Raj who sold their shares in the IPO. They could have gotten more money for the same shares.
Bala smiled back at Raj knowing very well what Raj's smile had meant. He didn't give a shit as long as he made money. What irked him a bit though was the way TinyPanda's trading price spiked and held at that high level. He had a feeling it was not going to drop below the offer price in the next 30 days. This meant they didn't need to buy back the greenshoe shares which would have made more money for Bala.
Having nothing more to do here, Bala began to make his way to the NYSE exit when his phone buzzed. It was a message from Gooli Guru.
"You should've pushed for an acquisition. Anyway, congrats on the IPO", the message read.
Bala was the leak.
A few parting thoughts
The IPO is just one route among the three to take a company public. The other 2 routes are Direct Listing and Special Purpose Acquisition Companies or SPACS (In India, there's no other route apart from IPO).
The IPO route has its pros and cons. The pro is that you have bankers who will advise you throughout, take on risks, and use their investor connections to ensure the IPO shares are bought.
The con is it is pretty costly (we discussed the fee in Part 1). But that's the more obvious con. The subtler con is that the IPO route tends to underprice the company. That's because the bankers are trying to balance the interests of the company IPO-ing as well as the institutional investors putting money into the IPO. And bankers have a strong incentive to appease institutional investors since they will come back for the next IPO the bank is advising. So they tend to agree to a lower valuation the institutional investor suggests. Or try to include the investor during allocation. I am not saying this always happens but the scenario is conducive for this happening.
Take the example of Snowflake, a cloud services company that IPO-ed in the US in 2020. The share price on the first day of trading jumped 112% which meant the investors exiting the IPO left $3.8B on the table. This has been quite a common occurrence in the last few years resulting in prominent venture capitalists like Bill Gurley being very vocal against the current IPO process and pushing companies to consider direct listing instead.
In the direct listing route, bankers don't have a say in the valuation and allocation. Investors bid on shares like in an auction and are allotted on a first come first serve basis. Companies like Slack and Spotify are recent examples of companies that chose direct listing over traditional IPO. But the direct listing process again has its pros and cons. And hence few people prefer the SPAC route.
However, I will not go into details of direct listing and SPACs here since this piece is already too long (lol). I will take your leave with this short comic strip (meme strip??)
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