mike moritz
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NYSE proposes big change to direct listings
The New York Stock Exchange filed paperwork this morning with the U.S. Securities and Exchange Commission to allow companies to raise capital as part of a direct listing.
Direct listings are a way for companies to go public by selling existing shares held by insiders, employees and investors directly to the market, rather than the traditional method of issuing new shares. Direct listings have become increasingly popular since Spotify’s 2018 exit, which allowed its employees immediate liquidity, removed preferred access from bankers and allowed for market-driven price discovery. Companies, like Spotify, that opt to complete a direct listing are able to bypass the financial roadshow, thus avoiding some of Wall Street’s exorbitant fees. Historically, however, these companies have not been able to raise fresh capital as part of the process.
The NYSE’s new proposal seeks to change that. Specifically, the stock exchange plans to amend Chapter One of the Listed Company Manual, which outlines the NYSE’s initial listing requirements for companies completing initial public offerings or direct listings. If the amendment is approved—the NYSE is subject to the regulatory oversight of the SEC—companies going public on the NYSE will be permitted to raise capital through a direct listing.
The document states the proposed change “would allow a company that has not previously had its common equity securities registered under the Act, to list its common equity securities on the Exchange at the time of effectiveness of a registration statement pursuant to which the company will sell shares in the opening auction on the first day of trading on the Exchange (a “Primary Direct Floor Listing”). The proposal would permit a company to conduct a Primary Direct Floor Listing in addition to, or instead of, a Selling Shareholder Direct Floor Listing.”
The proposed hybrid model is likely to appeal to Silicon Valley tech startups, who’ve grown more familiar with the innovate route to the public markets following Spotify and Slack’s direct listings. On the backs of these exits, tech industry leaders have touted direct listings as the latest and greatest path to the public markets. Venture capitalist Bill Gurley, in particular, has encouraged companies to consider the method. Meanwhile Silicon Valley darling Airbnb, which has stated its intent to go public in 2020, is said to be considering a direct listing rather than a traditional IPO.
Gurley, who has expressed his discontent with bankers’ inability to adequately price IPOs, recently hosted a one-day conference focused on direct listings titled Direct Listings: A Simpler and Superior Alternative to the IPO. The event was attended by members of tech’s elite, including Sequoia Capital’s Mike Moritz and Spotify chief financial officer Barry McCarthy .
“Most people are afraid of backlash from the banks so they don’t speak out,” Gurley told CNBC earlier this year of his decision to publicly advocate for direct listings. “I’m at a point in my career where I can handle the heat.”
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For Labor Day, work harder
Labor Day is a holiday that just doesn’t fit Silicon Valley. Its purported purpose is to celebrate working men and women and their — our — progress toward better working conditions and fairer workplaces. Yet, few regions in recent times have supposedly done more to “destroy” quality working conditions than the Valley, from the entire creation of the precarious 1099 economy to automation of labor itself.
My colleague John Chen offered the received wisdom on this discrepancy this weekend, arguing that Valley entrepreneurs should take the traditional message of Labor Day to heart, encouraging them to create more equitable, fair, and secure workplaces not just for their own employees, but also for all the workers that power the platforms we create and operate every day.
It’s a nice sentiment that I agree with, but I think he misses the mark.
What Silicon Valley needs — now more than ever before — is to double down on the kind of ambitious, hard-charging, change-the-world labor that created our modern knowledge economy in the first place. We can’t and shouldn’t slow down. We need more technological progress, not less. We need more automation of labor, not less. And we need as much of this innovation to happen in the United States as possible.
The tech industry may have become a dominant force by some metrics, but we are only just getting started. Entire industries like freight have little to no automation. Several billion people lack access to the internet, to say nothing of critical, basic infrastructure. Our drug pipeline is anemic, and costs for education, health care, construction, and government are continuing to skyrocket.
In short, we have barely scratched the surface of what we can achieve with software, with hardware, with better business models and better automation. These aren’t table scraps, but trillions dollar opportunities lying in wait for entrepreneurs to seize them.
And yet, we keep hearing persistent claims that overwork is a problem in the Valley. Discussions of work-life balance are practically de rigueur for startups these days, as are free meals and massages and unlimited vacation time. These demands are coming at a time when some of the most fertile opportunities for innovation in areas as diverse as robotics, space, biotech, cancer, and construction remain ripe for the taking.
It’s a hustlers world out there, and the message that those who want to shape that world should be hearing this Labor Day is simple: work harder. Hell, work today.
Certainly that’s the message ingrained in most places competing with the Valley these days. Mike Moritz wrote a column in the Financial Times earlier this year, comparing the hard-charging work ethic of Chinese tech entrepreneurs and workers with their Silicon Valley brethren. He didn’t mince words, and the piece ignited a firestorm of criticism.
But he’s right, and not just about Chinese founders. Entrepreneurs in developing and middle-income countries from India and South Korea to Brazil and Nigeria now have access to the same tools that top Valley startups use, with experience to boot. And they are hungry to transform their lot in life into something much more ambitious, much more grand.
We need to re-inject their level of urgency back into the Valley ethos and compete ferociously. We can’t rest on companies from the 1990s like Google, or the 1970s like Apple and Microsoft as the final wave of innovative companies. We need the next massive tech companies to be built, and they’re not going to be created 20-hour workweeks at a time.
Entrepreneurship is a rough and solitary life. Hustling isn’t fun, losing deals isn’t enjoyable, and working around the clock under intense pressure is not for the faint of heart. For those who want the easy road, there are many, many pathways today in the modern American economy that will guarantee it, whether that is a big tech giant, or some other Fortune 100 company.
Yet, the spirit of America is always choosing the bigger gamble, the bolder vision. And it is the people who stand up and demand that we make huge strides today — not tomorrow — that are going to own the future.
Of course, founding a company has to be a voluntary choice. No one should have to work for a pittance, or feel coerced into a high-pressure lifestyle when they aren’t ready and willing. No one should be locked into an economic system where they can’t improve their own income and status through tenacity and strategy. Our tech companies should absolutely be more diverse, and fairer to all people. Equity can and should be more widely distributed.
But when it comes to the true meaning of Labor Day in the American sense, we should celebrate the hard-working founders and entrepreneurs who are taking on the biggest challenges and focusing all of their talents on solving these critical human problems. That’s what made Silicon Valley what it is, and it’s the meaning of Labor Day that every founder and dreamer should center on.
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Mike Moritz and the declining America worker
Storied Sequoia investor Mike Moritz threw fire into the tech Twitter gumbo with his observations of hard-working Chinese workers and slothful Silicon Valley engineers. Moritz, a billionaire, clearly needs page views to fund his retirement. The major money quote about Silicon Valley is this: “In recent months, there have been complaints about the political sensibilities of speakers… Read More
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