This week, there will be two public-offering weeks. According to publicly available IPO calendars, Amplitude, a U.S. software company, will post a reference price for direct listing today and trade tomorrow morning. Warby Parker will also direct list this week. More information on its numbers is here.
TechCrunch will be covering both debuts with a lot of coverage.
These two IPOs are worth your attention, even if you're tired of IPOs. Amplitude's debut is notable because it follows large private-market funding. The company's liquidity model leverages large private fundraising and avoids the pricing issues that plague traditional IPOs, which have been a source of controversy for many Silicon Valley chattering classes.
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The Warby offering will correct or set market sentiment about D2C companies. Many don't consider the unicorn a technology company. Its e-commerce heritage and venture-backed history keeps it in TechCrunch's sights. It is also looking to list directly after having raised private capital in recent quarters.
These two listings will help us determine which side of the public/private divide is undervaluing startups. Either it is the bankers who are stealing unearned value from Silicon Valley graduates, or the private-market investors who are annoyed that any other person gains upside from startups.
Let's discuss how to sort it.
Direct the list, raise then
In recent years, we've seen many direct listings. Spotify is the most well-known. Asana was also listed via direct listing. Wise, Squarespace and Coinbase also listed Roblox.
Amplitude will also be able to flot without raising primary capital during its public debut. Crunchbase data shows that Amplitude raised $150 million in capital earlier this year, for a value of just over $4.2 billion. This way of raising private capital, followed by direct listing, is a better alternative to the traditional IPO that combines a primary raise with a public flotation.
A second variation of this method is to direct-list and then raise primary funds via a follow on offering after the market has determined a fair price for the equity. Companies can also direct list and raise primary capital. This will shift pricing power away from banks to investors directly. This last option is more theoretical than practical.
In order to avoid the excessive first-day pops some firms have experienced in recent quarters, unicorns who don't want to go public can raise private capital before or after a direct listing.
Roblox is an example for the raise-then direct list method. After seeing a few companies make it big, the company filed to go public. However, it was forced to cancel its IPO. The gaming company raised private funds in the early 2021s and was then listed on the direct market. Squarespace did the same: It raised $300m at a flat $10.0 Billion valuation (post-money), in March, before being listed on May.
Amplitude will be testing this model with Warby Parker this week. It begs the question: Can raising private capital and then directly listing solve the pricing problem that traditional IPOs create when institutional investors and bankers price the floating company at a lower price than retail investors will pay once it starts trading?
