|From: Glenn Petersen||5/10/2019 9:32:40 PM|
|U.S. regulators approve new Silicon Valley stock exchange|
May 10, 2019
SAN FRANCISCO (Reuters) - U.S. regulators on Friday approved a new stock exchange that is the brainchild of a Silicon Valley entrepreneur, a move that will give high-growth technology companies more options to list their shares outside of the traditional New York exchanges.
FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst/File Photo
The U.S. Securities and Exchange Commission approved the creation of the Long-Term Stock Exchange, or LTSE, a Silicon Valley-based national securities exchange promoting what it says is a unique approach to governance and voting rights, while reducing short-term pressures on public companies.
The LTSE is a bid to build a stock exchange in the country’s tech capital that appeals to hot startups, particularly those that are money-losing and want the luxury of focusing on long-term innovation even while trading in the glare of the public markets.
The stock exchange was proposed to the SEC in November by technology entrepreneur, author and startup adviser Eric Ries, who has been working on the idea for years. He raised $19 million from venture capitalists to get his project off the ground, but approval from U.S. regulators was necessary to launch the exchange.
Friday’s decision followed an uncertain fate for LTSE, which had faced SEC opposition before revising parts of its proposal.
Ries says the public market’s focus on short-term results leads to a decline in innovation, something LTSE wants to reverse. A 2017 study by public policy think tank Third Way showed that going public was accompanied by a 40 percent decline in patents within five years after listing, the result of pressure to satisfy analysts’ short-term expectations.
“Everyone is incentivized to make the numbers quarter to quarter,” Ries said in a recent interview with Reuters.
The new exchange would have extra rules designed to encourage companies to focus on long-term innovation rather than the grind of quarterly earnings reports by asking companies to limit executive bonuses that award short-term accomplishments.
It would also require more disclosure to investors about meeting key milestones and plans, and reward long-term shareholders by giving them more voting power the longer they hold the stock.
LTSE would be the only stock exchange in California and the first in Silicon Valley since the shuttering of the Pacific Exchange in San Francisco at the end of the dot-com boom. It remains to be seen how well it would compete with the larger and better-resourced New York Stock Exchange and Nasdaq, which often court tech companies with fanfare to persuade them to list.
Ries wants companies to go public sooner and have the ability to continue experimenting. This way, he said, more value can be created in the public markets, giving retail investors a chance to cash in on high-growth startups.
The median age of tech startups going public has stretched to 12 years, and by the time they list have achieved most of their growth, enriching only an elite group of investors.
Ries said LTSE would allow companies to dual-list their stock on other exchanges. He added that a number of technology companies and a mix of foreign and U.S. investors and asset managers had signed letters of intent to participate in the exchange, but declined to provide further details.
Reporting by Heather Somerville; editing by Steve Orlofsky and Jonathan Oatis
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|To: Glenn Petersen who wrote (57648)||6/20/2019 10:04:09 PM|
|From: Glenn Petersen|
|Slack shares surge 48% over reference price in market debut|
Published Thu, Jun 20 2019 12:08 PM EDT
Updated 6 hours ago
Lauren Feiner @lauren_feiner
Slack surged 48.5% in its debut Thursday on the New York Stock Exchange in a direct listing rather than an initial public offering.
- Slack surged 48.5% in its first day of trading on the New York Stock Exchange. It opened at a share price of $38.50, above the $26 reference price set by the exchange.
- Slack pursued an unusual direct listing rather than an IPO, meaning it did not have banks underwrite the offering.
- Slack reported a net loss of $138.9 million on revenue of $400.55 million for the year ended Jan. 31.
The stock, under the symbol WORK, opened at $38.50, nearly 50% above the reference price of $26 set by the NYSE on Wednesday night.
The pop puts Slack’s market cap at $19.5 billion. As of April, Slack was valued at nearly $17 billion on the secondary market, according to Forge Global, which matches private companies and their employees with investors. In its last financing round in 2018, Slack said it raised $427 million, which brought its valuation to $7.1 billion.
Slack is part of a slew of tech companies to go public this year including Uber, Lyft, Zoom, Pinterest, PagerDuty and CrowdStrike. But it is just the second large tech firm to pursue the unusual direct listing route in the past year and a half. Spotify surprised Wall Street with its decision to list directly onto the New York Stock Exchange last year.
In a direct listing, unlike an IPO, banks do not underwrite the offering, and no new shares are sold, so the company does not receive any additional money for operations. It’s simply a way for existing shareholders to get liquidity by registering their shares for sale on the public market. Plus, Slack doesn’t need to raise more money since it already has more than $800 million in cash on hand. Slack said it engaged Goldman Sachs, Morgan Stanley and Allen & Company as financial advisors and several more firms as associate financial advisors to assist it in the process.
While banks typically help determine pricing in an IPO, the NYSE set the reference price for Slack of $26 Wednesday night. The opening price for Slack’s Class A common stock was determined by the buy and sell orders collected by the NYSE from broker-dealers, according to Slack’s prospectus.
Like many tech companies, Slack debuted with a dual-class structure, with Class B shares holding 10 votes per share to consolidate voting power among its top shareholders. According to Slack’s prospectus, Accel is the company’s largest shareholder at 24%, followed by Andreessen Horowitz with a 13.3% stake and Social Capital at 10.2%. Slack CEO Stewart Butterfield owns an 8.6% stake and SoftBank holds 7.3%.
In an interview with CNBC’s Andrew Ross Sorkin ahead of the stock’s debut, Butterfield said Slack’s success foreshadows a change to email as we know it. Conventional email will be phased out in five to seven years, he said.
“Everyone will choose this,” Butterfield said of Slack, which provides a platform for public and private messaging channels.
Slack reported a net loss of $138.9 million on revenue of $400.55 million for the year ended Jan. 31. As of Jan. 31, Slack said it had over 10 million daily active users and saw its number of paid customers increase 49% year over year. Slack also has seen large growth among its highest-paying customers, those who pay over over $100,000 based on annual recurring revenue. The number of customers in that group was up 93% year over year compared with fiscal 2018, according to the prospectus.
Disclosure: Comcast Ventures, the venture arm of Comcast, is an investor in Slack. Comcast owns CNBC parent company NBCUniversal.
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|From: Glenn Petersen||10/8/2019 8:19:48 PM|
|Postmates’ new IPO delay says something bigger: Wall Street is turning against Silicon ValleyCan you smell the doom and gloom?|
By Theodore Schleifer @teddyschleifer
Oct 8, 2019, 1:10pm EDT
Tech startups imbibe cash and run on optimism. Lately they’re running short on both.
In the latest example of this new reality, Postmates, the food-delivery startup valued at over $2 billion that was expected to go public in 2019, recently told its IPO advisers that it is delaying its initial public offering due to market conditions, according to people familiar with the matter.
Postmates is just one of over a dozen startups worth over $1 billion that was expected to IPO in 2019. But as the end of the year approaches, a gloom is enveloping Silicon Valley, and it’s making for unusual shows of contrition, internal debates in board rooms, and insurgent attempts to change the Wall Street system that keeps delivering bad news to Silicon Valley.
Tech’s highest-profile startups have largely bombed on the stock market since they went public this year: The value of Lyft has been cut in half. Its rival Uber is down over 25 percent. Slack and Peloton are trading well below their IPO prices. And, of course, WeWork’s ambitions crashed into reality when public investors balked at the company’s price tag, leading the company to pull its IPO altogether rather than post its own gnarly red ink.
Postmates CEO Bastian Lehmann said on Friday at a startup conference that the company was closely watching the macroeconomy and indicated that other startups has caused them to second-guess their timing.
“The reality is that we will IPO when we believe we find the right time for the business and the right time in the markets. And if you look at the markets right now, they are, I believe, a little choppy,” he said. “They’re a little choppy when it comes to growth companies specifically.”
Asked if Postmates would go public in 2019, Lehmann said that, “it depends more on the macro than it does on our readiness.”
But a 2019 IPO as of now appears unlikely — and Postmates is at least preparing for the delay. Postmates recently distributed paperwork to shareholders saying that it is pushing back the start of its expected lockup period to about midway through the first quarter of next year, according to people familiar with the matter. That’s at least the second time that Postmates has pushed back the deadline.
Postmates’ decision does make some sense considering how other tech startups have fared in 2019. Yes, some unsexy, profitable software companies are doing fine. But an IPO narrative is set, fairly or unfairly, by the sector’s marquee consumer companies. And it’s clear as 2019 wraps up that the rest of the world does not believe in Silicon Valley as much as Silicon Valley believes in itself.
The 32 tech companies that went public in 2019 have only appreciated in value by an average of about 5 percent, according to Renaissance Capital, which tracks IPO performance. In 2018, that stat was about 13 percent. And in 2017? A 94 percent return rate.
But you don’t need to read IPO stats to see the mood changing. Frustrations manage to manifest themselves in new ways every day in Silicon Valley.
In the most concrete demonstration yet of Silicon Valley’s growing dissatisfaction with the ways in which companies go public, hundreds of investors and founders gathered last week in downtown San Francisco to discuss alternatives to the traditional IPO. For over seven hours, Silicon Valley’s bumper crop of startups imagined a future with Wall Street banks controlling less of their futures, part of a symposium to extol the virtues of what are called direct listings, or “a Simpler and Superior Alternative to the IPO,” as the agenda for the closed-door meeting described them. ( Here’s how direct listings work.)
On Monday, the person who is singularly most responsible for the recent run-up in startup prices, Masayoshi Son, expressed a rare pang of regret. The head of SoftBank, whose Vision Fund is plowing over $100 billion into young companies, said he is “embarrassed and flustered” by his track record in investing.
And the famously optimistic investor — who pushes the founders he backs to be “crazy” and grow to the brink — is now preaching a new message after the IPO flops of SoftBank’s biggest startup bets: Uber and WeWork.
“Recently, I’ve been telling founders to ‘know your limit,’” Son said in an interview with Nikkei Business. “Knowing your limitations will help unleash limitless possibilities.”
And over at Postmates, company leadership has been pumping the brakes amid some internal debates over the ideal time to go public. Postmates confidentially filed its paperwork for an IPO in February but has yet to “flip” its prospectus and formally kick off IPO proceedings. That’s an unusually long time to sit in limbo.
Postmates declined to comment.
But for all the moves beneath the surface, there are deeper cultural and financial reasons that suggest this new gloom won’t actually change anything.
Silicon Valley abhors doomsayers and runs on some collective delusion: Yes, the IPO market might be bad for most companies, but not my company. Investors and startup founders are inclined to wax philosophic about the future of technology, clinging to rosy projections meant to inspire, brand themselves, and make them money. Tech leaders’ fundamental optimism might be genuine, but it is also socially scripted.
Meanwhile, none of the fundamentals of Silicon Valley deal-chasing have changed: Each individual venture capital firm is still desperate to win the favor of the next great company, pushing up valuations in what could be seen as a Tragedy of the Commons. Those ballooning valuations are only pierced when they’re rejected by Wall Street in an IPO.
Even if American startups are overvalued, few individual investors — acting in their own self-interest — are willing to retrench. And 2019’s IPO disappointments aren’t likely to change their minds.
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