Like eliminating the DH... The SEC (aka the police and rulemaker of public stock markets), just approved a new way for companies to go public — The "Primary Direct Floor Listing" (FYI, The New York Stock Exchange had asked for this.) And it includes the best of both worlds: Companies can raise money IPO-style and get the right price direct listing-style.
- It's IPO-ish: This lets companies create new stock and sell it to the public. They enjoy fresh cash to grow their business at the same moment they graduate from private to public.
- It's direct listing-ish: Instead of paying big fees to investment banks to guide their Initial Public Offering (IPO), companies simply release their stock into the wild, letting the markets decide the price.
Dilution, we have a problem... The major recent criticism of IPOs is that stock is getting mispriced by investment banks. Just this month, investment banks thought DoorDash and Airbnb's stocks were worth $102 and $68, but they were off by 86% and 113%. The losers to these mis-pricings were the companies that sold stock for way less than they could have — that results in unnecessary dilution of their stocks.
This new way to IPO is bad for investment banks... and the institutional investors who get special treatment with IPOs. Top i-banks earn hundreds of millions of $$$ in fees by advising IPOs — They're gatekeepers to public markets. Outspoken IPO-critic and VC investor Bill Gurley thinks this change will "unquestionably" lead to the end of traditional IPOs. Despite the news, stocks of the #1, #2, and #3 leading IPO banks rose yesterday: Goldman Sachs, Morgan Stanley, and Bank of America.