Palantir and Asana Test Direct Listing Method as Alternative to Traditional IPOs
Tech companies Palantir and Asana are going public this week through direct listings, doubling the number of tech firms that used this method in the past two years. The move bypasses Wall Street underwriters and avoids traditional IPO fees.
Palantir and Asana are going public this week through direct listings, a method that bypasses traditional Wall Street underwriters. By choosing this route, these tech companies allow existing shareholders to sell shares on a stock exchange without issuing new stock or raising additional capital. This approach doubles the number of tech firms that use direct listings compared to 2018 and 2019, following similar moves by Spotify and Slack.
Venture capitalists like Bill Gurley heavily promote direct listings to eliminate the hefty fees associated with traditional initial public offerings. While most other tech startups in 2020 stick to the conventional IPO process, Asana and Palantir provide a major test for this alternative strategy. The direct listing format also removes the standard lock-up period, letting current shareholders sell their holdings immediately.
Asana brings strong growth to the public market, boasting 1.2 million paying users and revenue that jumps 86 percent to $143 million last year, though the collaboration software maker still operates at a loss. Palantir takes a different path as a data analytics firm rooted in defense and intelligence. Both companies enter a highly favorable market for business software, where recent public offerings like Snowflake and JFrog see massive stock surges.