Slack has gone public with a direct listing, but is this type of non-IPO just a fad?
Neil Wilson, chief market analyst at Markets.com, says YES.
Direct listings can work, and you may well get superior price discovery, but theyre suitable only for a relatively small number of firms and will never replace the traditional IPO, complete with its roadshow and bell-ringing razzmatazz.
Direct listings work if you dont need to raise money and simply want to let employees cash out. Slack has $800m in cash in the bank – it didnt need to raise a penny. But if you really want to attract fresh capital to expand and grow the business, there is no option but an IPO.
Most firms are not famous tech unicorns that have spent years in private hands and gone through multiple rounds of fundraising. For most of the unknown Aim-listed stocks, for example, a direct listing is simply out of the question. Without the underwriting process, theyd be taking an unacceptable risk.
And if you want to attract the big institutional funds, those that have the deep pockets and experience to stick with you for the long haul, then youre better off with an IPO.
Elisabeth Cowell, partner at Newgate Communications, says NO.
Call it Silicon Valley driven hype if you like, but direct listings are here to stay.
Before Slack used the hitherto little-known method to go public, Swedish music streamer Spotify executed its own direct listing. Its desire to deliver a liquidity event which would reward existing shareholders sat front and centre of its mission to enter the equity markets last year.
Unlike a “traditional” IPO, a direct listing does not involve lock-ins and restrictionsRead More