As flotations boom, we look at what is changing at a key moment in capitalism | Business
talked to bosses and chief financial officers of companies that have recently listed or are about to, as well as venture capitalists, bankers and brokers, most of whom spoke on the condition of anonymity. The result is a rough-and-ready guide to everything that is new in what one chief executive dubs the “key moment in capitalism”.
That in turn all but ensures a share-price “pop” on the first day of trading, generating a quick profit for the public investors at the expense of the private ones. In the past decade the pop averaged 21%, according to an analysis by Jay Ritter of the University of Florida. And the first-day surge can be much bigger. Snowflake, a cloud-based data platform which went public last year, popped by 112%, adding nearly $40bn to its market value.
For the time being, startups eyeing direct listings simply raise money ahead of the flotations, as Databricks, a data-management firm eyeing a listing, has done in two rounds this year that brought in $2.6bn. But the ability to raise new capital may in time make direct listings appealing to companies with less cash than the tech darlings that have already taken the direct route, like Spotify or Slack .s. These have been around for decades, as has their reputation for dodginess .
But here, too, change is afoot. Improved access to information and investors lets bosses play off the big three banks, and the ten or so others in the prospectus that provide additional distribution of shares and analyst coverage, against each other. Banks are responding by throwing in ever more extra sweeteners, such as offering to manage a founder’s future wealth, or loans in exchange for collateral in the form of privately held stakes.
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