Bill Gurley – Direct Listing vs. IPO - [Invest Like the Best, EP.144]

Invest Like the Best with Patrick O'Shaughnessy

Colossus

Technology, Business, Investing

4.7 • 2.5K Ratings

🗓️ 24 September 2019

⏱️ 47 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

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 investing community in recent months: the comparison between bringing a company public through a traditional IPO vs. what’s known as a direct listing. As a third party observer with no real dog in the hunt (as we don’t buy IPOs at O’Shaughnessy Asset Management), I thought this was a small and nuanced issue. I’ve therefore been surprised by the strength of opinions on both sides of this issue as I’ve explored it behind the scenes this past week. It feels almost like I’ve encountered a political third rail, where one side throws a lot of vitriol towards the other. 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. Now please enjoy my very interesting conversation with Bill Gurley For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag Show Notes 1:22 - (First Question) – His view on the IPO process 5:42 – Will now be the turning point for IPO’s 6:40 – The engagement between a new company going public and their counterparty and the IPO process 13:38 – The math of capital costs 18:18 – Banks that underprice the IPO’s 20:45 – The psychology of IPO’s 23:14 – The pop in the IPO and the media 24:54 – The value that shareholders give vs VC’s 25:37 – The Green Shoots 28:17 – The lock-up 31:40 – Direct listings vs IPO’s 36:07 – Spotify’s CEO Reveals Why He’s Not Doing a Traditional IPO 38:23 – The capital raised in an IPO and diluting the company 40:18 – Privilege access and buy-side firms 43:33 – What will actually lead to changes in the IPO space 44:48 – Why he became so interested in the IPO space Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on Twitter at @patrick_oshag

Transcript

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0:00.0	Hello and welcome everyone, I'm Patrick O'Shaughnessy and this is Invest Like The Best.
0:08.6	This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies
0:13.9	that will help you better invest both your time and your money.
0:17.2	You can learn more and stay up to date at InvestorFieldGuide.com.
0:24.6	Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management.
0:28.5	All opinions expressed by Patrick and podcast guests are solely their own opinions and do
0:32.9	not reflect the opinion of O'Shaughnessy Asset Management.
0:36.3	This podcast is for informational purposes only and should not be relied upon as a basis
0:40.6	for investment decisions.
0:42.4	Clients of O'Shaughnessy Asset Management may maintain positions and the securities discussed
0:46.2	in this podcast.
0:49.7	My guest this week is Bill Gurley, General Partner at Benchmark Capital.
0:52.8	Our conversation is about one specific issue that has popped up as a topic of interest in
0:56.5	the investment community in recent months, the comparison between bringing a company
0:59.9	public through a traditional IPO and what's known as a direct listing.
1:03.7	To be clear, this episode is very much in favor of direct listings instead of traditional
1:07.1	IPOs.
1:08.1	For those that want a good discussion of the IPO process and its upsides, check out episode
1:12.1	173 of the Exponent Podcast with Ben Thompson, which I'll link in the show notes.
1:16.8	Now please enjoy my very interesting conversation with Bill Gurley.
1:22.1	To Bill, we're going to tackle a single issue on the podcast, which I think the first
1:26.6	time that we've done that and a fun framing for introducing what this issue is is the
	...

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