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I don't agree with the conclusion in the headline that this "puts direct listings in jeopardy". It should make them more likely. It makes them more attractive

I don't agree with the conclusion in the headline that this "puts direct listings in jeopardy". It should make them more likely. It makes them more attractive to companies, and less attractive to investors. And the companies are the ones making the decisions! Investors grumble about investor-unfriendly structures from public companies all the time: dual class stock, staggered boards, executive pay. But they suck it up and buy the companies at the same prices anyway. And it's not like this ruling gives companies carte blanche to defraud investors - in fact it's specifically about protecting companies that make a good faith mistake. So investors can't make direct listings unpalatable. Who can? An act of Congress, or perhaps the SEC finding a way to make these companies' lives really miserable. Or major index providers deciding they won't include companies that went public via direct listing - but even then they'll likely have to cave to investor pressure.

diogocp 3y ago
> It makes them more attractive to companies, and less attractive to investors. No, it also makes them more attractive for (real) investors. Reminder that investors own the company, so when a parasite investor joins up with some class action lawyers to sue the company, they are just looking for a cash grab at the expense of all the other investors.
NoboruWataya 3y ago
I agree that direct listing aren't in jeopardy. But the points you mention are all symptoms of the low interest rate, tech bubble environment we have been living in for the last few years, where investors have been desperately throwing money at anything that promised a positive yield. Same with cov-lite loans. It's probable that we are entering a period where investors can afford to be more picky. So companies trying to avail of structures and processes that give them more protection at the expense of investors may find their cost of capital is higher. Which is fine! Different processes to suit different issuer and investor risk profiles is no bad thing.

diogocp 3y ago

> It makes them more attractive to companies, and less attractive to investors. No, it also makes them more attractive for (real) investors. Reminder that investors own the company, so when a parasite investor joins up with some class action lawyers to sue the company, they are just looking for a cash grab at the expense of all the other investors.

NoboruWataya 3y ago

I agree that direct listing aren't in jeopardy. But the points you mention are all symptoms of the low interest rate, tech bubble environment we have been living in for the last few years, where investors have been desperately throwing money at anything that promised a positive yield. Same with cov-lite loans. It's probable that we are entering a period where investors can afford to be more picky. So companies trying to avail of structures and processes that give them more protection at the expense of investors may find their cost of capital is higher. Which is fine! Different processes to suit different issuer and investor risk profiles is no bad thing.