MiB: How to Fix a Broken IPO System

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The Initial Public Offering (IPO) system is broken. A better system: Use “Direct Listings” as a superior method for bringing companies public. The current IPO system hurts ordinary investors, provides less capital to the company going public itself, and allow more information to be shared pre-listing.

So argues Bill Gurley, the legendary venture capitalist at Benchmark. His investments include GrubHub, Nextdoor, OpenTable, Zillow and (most famously) Uber. He is a member of the Board of Trustees of the Santa Fe Institute, and is widely considered one of most influential dealmakers in technology. He was named TechCrunch’s VC of the Year in 2016.

Direct listing, Gurley says, allows firms to capture more of their own value when listing publicly. The current IPO system works well for institutional buyers, who gain access to fast growing companies at a substantial discount to actual value.

Gurley began his career as an engineer at Compaq, and became interested in trading stocks in the 1990s. He recalls how he “knocked on doors” looking for a job on Wall Street while attending the University of Texas McCombs School of Business Business. Credit Suisse First Boston offered him a job — the only firm to do so. Eventually, he moved to the buy side, joining Frank Quattrone at Deutsche Morgan Grenfell (DMG) in Silicon Valley, ending up as the lead analyst of the Amazon.com’s 1997 IPO.

His favorite books are here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyStitcherGoogleBloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Gary Chropuvka, President of World Quant. The firm was spun out of Millennium Management in 2007, and manages about $7 billion dollars. Previously, Chropuvka was co-head of the Quantitative Investment Strategies (QIS) team at Goldman Sachs Asset Management (GSAM).

 

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