Coinbase Direct Listing
The markets have seen manifold changes in how companies decide to go public. Those in the IPO process — bankers, advisors, exchanges, lawyers, and the audit community — adjusted, allowing companies to access the public markets in the most appropriate way for them.
In 2021 the Wall Street community echoes the Burger King slogan, “Have it your way.” We see the SPAC (special purpose acquisition company)-crazy transactions with over 203 SPACs raising $58B and 57 IPOs raising $21B in 2021. New this month is Nasdaq’s first 2021 major direct listing, Coinbase Global.
While the direct listing opportunity isn’t new, it has evolved with major proponents like Bill Gurley touting this method. Both NYSE and NASDAQ scrambled to meet the needs of new companies who preferred a direct listing (DL). In 2019, while I was with Nasdaq, the only notable DL was Spotify. Investors saw Barry McCarthy, Spotify’s then CFO, pioneer the new direct listing method when Spotify launched its own public offering. The resulting momentum of DLs catapulted McCarthy to the rank of “elder statesman” in the tech community, according to Vox.
In April 2019, Slack filed for an IPO. Since Nasdaq had not performed a major direct listing, the company followed the lead of Spotify (and Barry McCarthy) to directly list with NYSE in late Dec. 2019. This gave more control over the process to Slack and its founders.
The DL trend continued with Palantir and Asana who both debuted in Sept. 2020. While performing modestly well on Day One, Palantir has lost 18 percent over the past 3 months and Asana has been bouncing around up and down 13 percent since going public.
The unpredictable performance of the two stocks isn’t exactly a ringing endorsement of the direct listing. With Coinbase Global, the largest cryptocurrency brokerage based in the U.S., planning to go public, all eyes will be on Nasdaq‘s performance as it brings its first major direct listing to market.
One significant difference with the Coinbase direct listing: they used Nasdaq’s Private Markets price discovery to set the reference price as their target. Even as NYSE sits this one out, it’s clear there will be more DLs coming down the pipe. This type of listing is not going away.