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It's a tiny bit pedantic, but the Coinbase offering today was not actually an IPO, I learned, but a DPO (Direct Public Offering). It was not a fundraising even

It's a tiny bit pedantic, but the Coinbase offering today was not actually an IPO, I learned, but a DPO (Direct Public Offering). It was not a fundraising event for Coinbase, only a liquidity event for shareholders, and unlike an IPO no explicit valuation process occurred to select an offering price.

ilyaeck 5y ago
What difference does it make? Shares trading openly on the market is as explicit a valuation process as it gets.
- Zelphyr 5y ago
  I don't know much about finance but based on what GP said, the biggest difference (aside from the acronym) is that one is a fund-raising event and the other is a liquidation event for shareholders. I read the latter as Coinbase's investors said at a board meeting, "Ok, we're ready to cash out now." so they held the DPO.
- RaketenStadt 5y ago
  There are a number of important differences, in fact the only meaningful comparison is that they are selling shares to the public. The title is wrong, there is no IPO. Presumably "IPO" is meant as "public offering." If there's a place to be specific about these things, isn't this thread it?
- ttt333 5y ago
  Kinda. In a normal IPO the big banks will agree to underwrite (that is, buy from the company and then immediately sell to investors) all the shares at an initial "offering price", and this is agreed upon in writing a little bit before the launch day. I don't believe this happens in the direct listing format, it just starts floating with no underwriting process. So there is a difference in structure, but to your point immediately after launch it does not really matter to the general investing public
- fernandopj 5y ago
  The basic difference: In an IPO the company puts private shares in the open market and gets money from it, priced at the IPO price. Whoever has (private) shares now has public shares and can trade whenever they want. In a Direct Listing the company often already traded shares "openly" but not in a "public" way, but now wants it listed publicly so retail investors can trade it, and there's no immediate need of capital so the objective isn't to get a funding from offering shares in an IPO.
- fossuser 5y ago
  Banks rip off companies in IPOs by underpricing the stock so their investors get a kickback. That's the least charitable way to write it, but it's somewhat close to the truth (the other part of the truth is that pricing is hard which is why we have markets). DPOs allow companies to list at a reference price without losing out on money - they can sell at the true price later. Banks naturally make up a bunch of reasons why this is bad, but it's mostly nonsense. When one side does many of these types of transactions per year (banks) and one side may only do one or two in a lifetime (founders) expect the side with more experience to both tilt the deal in their favor and to have a compelling narrative of why it's actually better for you. See: https://podcasts.apple.com/us/podcast/bill-gurley-direct-listing-vs-ipo-invest-like-the-best-ep-144/id1154105909?i=1000451016956 https://podcasts.apple.com/us/podcast/bill-gurley-direct-lis... There's a funny story (I searched briefly, but couldn't find) that when Elon took Tesla public via an IPO and the bankers told him the initial price he just said "no, at least $XX or no deal". I think the bank price was $17 and he said at least $19, but I could be off on the numbers. They did his price and that price was still too low. It's a mistake for any company to IPO from now on imo, SPACs are even worse really (unless you're running a fraud in which case SPACs are great).
  - u678u 5y ago
    DPO is the same though right? If you do the capital raise before the DPO or a capital raise in an IPO there isn't much difference.
    - fossuser 5y ago
      If you're doing a capital raise privately before the public offering then you can set the terms you think are fair, but this isn't really required for a direct listing unless you need to raise money. You can list and put up shares on the market later. I think there's something new where you can list directly and then sell to the public too without the bank underwriting rip off thing, but that's the edge of my knowledge. I'm not super confident here, so definitely possible I'm wrong about specifics.
eloff 5y ago
Its not pedantic at all, it's the most interesting part of this IPO, because this is a new way to do IPOs.
- xbmcuser 5y ago
  its not interesting this is just another way stock markets are more about gambling instead of a way to raise capital. Previously you had startups doing their best to get sold to big companies instead of becoming profitable companies. Now they are going this route.
  - eloff 5y ago
    I don't know what your argument actually is, or what it has to do with what I said. You're just complaining under my comment because you objected to the word interesting.
- Aunche 5y ago
  Spotify and Slack went public through direct listings as well.
  - fossuser 5y ago
    Also Palantir and Roblox - I think it's the way forward for most companies. Spotify was the first and the others have had slight variation to terms, but the core idea is good.
  - eloff 5y ago
    Yeah, I wonder if this will become a trend. I always thought the underwriting agency in an IPO was a form institutional gate keeping / toll booth on the road to going public.
    - ProAm 5y ago
      It will be a trend for heavy VC funded companies that are not really profitable (not speaking about Coinbase specifically). DPO's allow VC to recoup investments at around the 10 year mark for company's that do not make financial sense on paper.
xadhominemx 5y ago
A traditional IPO does not have to be a fundraising event. This was an IPO, just one structured as a direct public offering instead of negotiated sales the day before.
Scoundreller 5y ago
Doesn't the Coinbase treasury create/hold un-issued Coinbase shares? Do we know they didn't sell any of those?
dang 5y ago
Ok, we've DPO'd the title above.
vmception 5y ago
The distinctions you are making are not exclusive to IPOs They just opened up a share selling shop on the stock exchange, instead of selling it to banks (that already have shops) at wholesale price. Any shareholder can sell through that shop window, including the company.
dehrmann 5y ago
If you have employee shares, it's very much not pedantic since there's no lockup period.

ilyaeck 5y ago

What difference does it make? Shares trading openly on the market is as explicit a valuation process as it gets.

Zelphyr 5y ago
I don't know much about finance but based on what GP said, the biggest difference (aside from the acronym) is that one is a fund-raising event and the other is a liquidation event for shareholders. I read the latter as Coinbase's investors said at a board meeting, "Ok, we're ready to cash out now." so they held the DPO.
RaketenStadt 5y ago
There are a number of important differences, in fact the only meaningful comparison is that they are selling shares to the public. The title is wrong, there is no IPO. Presumably "IPO" is meant as "public offering." If there's a place to be specific about these things, isn't this thread it?
ttt333 5y ago
Kinda. In a normal IPO the big banks will agree to underwrite (that is, buy from the company and then immediately sell to investors) all the shares at an initial "offering price", and this is agreed upon in writing a little bit before the launch day. I don't believe this happens in the direct listing format, it just starts floating with no underwriting process. So there is a difference in structure, but to your point immediately after launch it does not really matter to the general investing public
fernandopj 5y ago
The basic difference: In an IPO the company puts private shares in the open market and gets money from it, priced at the IPO price. Whoever has (private) shares now has public shares and can trade whenever they want. In a Direct Listing the company often already traded shares "openly" but not in a "public" way, but now wants it listed publicly so retail investors can trade it, and there's no immediate need of capital so the objective isn't to get a funding from offering shares in an IPO.
fossuser 5y ago
Banks rip off companies in IPOs by underpricing the stock so their investors get a kickback. That's the least charitable way to write it, but it's somewhat close to the truth (the other part of the truth is that pricing is hard which is why we have markets). DPOs allow companies to list at a reference price without losing out on money - they can sell at the true price later. Banks naturally make up a bunch of reasons why this is bad, but it's mostly nonsense. When one side does many of these types of transactions per year (banks) and one side may only do one or two in a lifetime (founders) expect the side with more experience to both tilt the deal in their favor and to have a compelling narrative of why it's actually better for you. See: https://podcasts.apple.com/us/podcast/bill-gurley-direct-listing-vs-ipo-invest-like-the-best-ep-144/id1154105909?i=1000451016956 https://podcasts.apple.com/us/podcast/bill-gurley-direct-lis... There's a funny story (I searched briefly, but couldn't find) that when Elon took Tesla public via an IPO and the bankers told him the initial price he just said "no, at least $XX or no deal". I think the bank price was $17 and he said at least $19, but I could be off on the numbers. They did his price and that price was still too low. It's a mistake for any company to IPO from now on imo, SPACs are even worse really (unless you're running a fraud in which case SPACs are great).
- u678u 5y ago
  DPO is the same though right? If you do the capital raise before the DPO or a capital raise in an IPO there isn't much difference.
  - fossuser 5y ago
    If you're doing a capital raise privately before the public offering then you can set the terms you think are fair, but this isn't really required for a direct listing unless you need to raise money. You can list and put up shares on the market later. I think there's something new where you can list directly and then sell to the public too without the bank underwriting rip off thing, but that's the edge of my knowledge. I'm not super confident here, so definitely possible I'm wrong about specifics.

eloff 5y ago

Its not pedantic at all, it's the most interesting part of this IPO, because this is a new way to do IPOs.

xbmcuser 5y ago
its not interesting this is just another way stock markets are more about gambling instead of a way to raise capital. Previously you had startups doing their best to get sold to big companies instead of becoming profitable companies. Now they are going this route.
- eloff 5y ago
  I don't know what your argument actually is, or what it has to do with what I said. You're just complaining under my comment because you objected to the word interesting.
Aunche 5y ago
Spotify and Slack went public through direct listings as well.
- fossuser 5y ago
  Also Palantir and Roblox - I think it's the way forward for most companies. Spotify was the first and the others have had slight variation to terms, but the core idea is good.
- eloff 5y ago
  Yeah, I wonder if this will become a trend. I always thought the underwriting agency in an IPO was a form institutional gate keeping / toll booth on the road to going public.
  - ProAm 5y ago
    It will be a trend for heavy VC funded companies that are not really profitable (not speaking about Coinbase specifically). DPO's allow VC to recoup investments at around the 10 year mark for company's that do not make financial sense on paper.

xadhominemx 5y ago

A traditional IPO does not have to be a fundraising event. This was an IPO, just one structured as a direct public offering instead of negotiated sales the day before.

Scoundreller 5y ago

Doesn't the Coinbase treasury create/hold un-issued Coinbase shares? Do we know they didn't sell any of those?

dang 5y ago

Ok, we've DPO'd the title above.

vmception 5y ago

The distinctions you are making are not exclusive to IPOs They just opened up a share selling shop on the stock exchange, instead of selling it to banks (that already have shops) at wholesale price. Any shareholder can sell through that shop window, including the company.

dehrmann 5y ago

If you have employee shares, it's very much not pedantic since there's no lockup period.