The Unusual Suspects: Asana and Palantir go public through Direct Listings

Thursday, October 1, 2020 by Robinhood Snacks | Disclosures

Like a DM vs. a $10 Papyrus greeting card... Direct Listings are generally cheaper and faster than IPOs. When a company chooses to take its stock public via DL instead of IPO'ing, they aren't creating new shares to sell. Owners of private stock (early investors and employees) unleash their existing shares to the public, so the company isn't raising any fresh cash. Yesterday, two companies took this simpler route to going public:

  • Palantir is the secretive software company that crunches data for big clients like the government. The stock closed slightly lower than the opening price.
  • Asana is the team task management tool where you get anxiety by looking at a board of color-coded objectives. The stock ended the day slightly up.

I'm different, yeah I'm different... DLs are rare, but it's even more unusual to see non-consumery companies do them. Only two well-known companies, Slack and Spotify, have DL'd (until yesterday). Their stocks soared on Day 1 since we're all familiar with what they do. Not so much for Palantir and Asana.

  • Pros: DLs don't involve paying big fees to investment banks. They don't dilute the value of existing stock because: #nonewstock.
  • Cons: Those investment banks that advise on IPOs also help build up interest in the stock from investors and can guarantee a certain amount will be sold. DLs don't get that promo service.

Going public is turning into an "à la carte" menu... and companies are taking advantage of the options. Before, there was 1 way to go public: the expensive prix-fixe menu IPO (no, you can't swap fish for the meatballs). Companies have been increasingly looking to DLs and SPACs to go public without paying fees to banks. Private companies will be following Asana and Palantir's stock to gauge the success of this new option.