Welcome To Paradise?…What Is Going On With IPO’s SPACs and Direct Listings?

Airbnb goes public today and might trade at $80-$100 billion.

Doordash went pubic yesterday and doubled to trade at $60 billion.

Remember $SNOW?

The markets are paradise if work at these companies or are a friend of the bankers and/or company doling out the IPO shares.

I joked on Stocktwits and Twitter that:

In October, Tomasz Tunguz of Redpoint wrote a post titled ‘Why IPOs, Direct Listings, and SPACs Will Flourish in Startupland’. The conclusion he came to…

In 2017 and 2018, the median high-growth private company raised at a higher forward ARR multiple than in the public markets. Starting in 2019 and continuing in 2020, the public markets value these companies with better multiples.

This is a critical shift. It means raising capital in the public markets is now less expensive than in the private markets.

In 2018, I wrote Access is the Scarcest Commodity in Startupland, which reviewed historical data to prove the point that the liquidity premium that used to exist in the public markets had been replaced with an access premium in the private markets. In software for at least the last few years, the public market premium is back after a multi-decade hiatus. And if it continues, we should expect the IPO, the direct listing, and special purpose acquisition vehicles (SPACs) to present compelling financing options to later stage founders.

Back to me…

Rates are low, credit spreads are tiny, the vaccine is coming and so is more government assistance money.

The markets will correct of course, but the stage continues to be set for more IPOs, SPAC’s and direct listings.

Charlie put together a great post titled ‘IPO Fever and a Look Back at IPOs Over the Last 10 Years’.

Have a great day.

PS – I had Tomasz on my panic podcast this spring. You can listen here.