Slack, Spotify and Michael Lewis will join nearly every big investor in Silicon Valley to talk about direct listings vs IPOs

Key Points
  • Benchmark's Bill Gurley and Sequoia's Mike Moritz are speaking at the event.
  • CEOs from Zillow, Stitch Fix and MuleSoft are on a panel to discuss going through the traditional IPO process.
  • Gurley has been a vocal critic of IPOs for a long time and has assumed an even louder voice in the past month.
Bill Gurley
Adam Jeffery | CNBC

Bill Gurley, the venture capitalist from Benchmark and former Uber board member, is leading a meeting in San Francisco on Tuesday to explore alternatives to the traditional IPO process, which the investor said recently has put Silicon Valley "on the bad end of a bad joke for about four decades now."

The invitation-only event — Direct Listings: A Simpler and Superior Alternative to the IPO — is being held at the Palace Hotel in San Francisco and will include presentations from public CEOs and CFOs who have gone through IPOs in recent years, as well top executives from Slack and Spotify, which bypassed underwriters in favor of the direct listing path, according to the agenda obtained by CNBC.

The direct listing approach will be a primary topic of discussion, as companies look for ways to allow employees and early investors to sell shares without waiting for the six-month lock-up period to expire and to avoid paying such hefty fees to underwriters. One of the main ways bankers currently make money is through the so-called greenshoe, which allows them to buy shares at the IPO price after the initial pop.

Sequoia Capital's Mike Moritz is participating in a session with Spotify CFO Barry McCarthy. Sequoia is a large investor in Airbnb, one of the largest remaining tech companies that has not gone public. It's expected to pursue a direct listing next year, according to Bloomberg.

CEOs speaking include Zillow's Rich Barton, who co-founded the real estate site in 2004 and just took the helm this year, Stitch Fix's Katrina Lake and MuleSoft's Greg Schott, whose company was bought by Salesforce last year.

From the buy side — the investors who buy public stocks — the event will feature a discussion between money managers at Wellington, Holocene and Altimeter.

About 100 private companies are expected to attend, along with partners from venture firms Andreessen Horowitz, Menlo Ventures, Bessemer Venture Partners, GGV and others, according to people familiar with the event who asked not to be named because the guest list is private. Stacey Cunningham, president of NYSE Euronext will be interviewed on stage, and Jay Ritter, an IPO expert and business professor at the University of Florida, will present four decades worth of data.

'Those days are over'

Gurley was recently on CNBC with Altimeter's Brad Gerstner, who agreed that the byzantine IPO process has to change.

"The days of handing low-priced securities, diluting the company to a bunch of long-only shops in Boston and New York, I think those days are over," Gerstner said.

That conversation was on Sept. 10. Nine days later Gurley posted a tweetstorm following the public market debut of software company Datadog, which popped 39% out of the gate. Gurley called it a $293 million giveaway to new investors and underwriters by pricing the deal below demand. In his final tweet of the storm, Gurley urged people "to attend an industry-led SF-based event on Oct 1st where will explain how this happens & discuss the better alternative."


Spotify pioneered the direct listing model and Slack became the second major company to take that route this year. Airbnb could be next.

Stewart Butterfield, chief executive officer of Slack Technologies Inc., right, with Allen Shim, chief financial officer of Slack Technologies, Inc., on the floor of the New York Stock Exchange (NYSE) during the company's initial public offering (IPO) in New York, U.S., on Thursday, June 20, 2019.
Michael Nagle | Bloomberg | Getty Images

"Airbnb has a lot of the criteria you look for in a direct listing," Rick Heitzmann, a partner at Airbnb backer FirstMark Capital, said in an interview on CNBC on Tuesday. In addition to having a strong consumer brand and profitability, "there's been enough float and secondary trading so there's a price discovery out there so you have a pretty good sense of what the company's value is going to be."

Even for companies that prefer the more traditional IPO approach, there are ways to better price deals through technology that more can accurately match supply and demand. Rather than leaving tens or hundreds of millions of dollars on the table, software could help establish a clearing price, giving more money back to the company.

Author Michael Lewis, who wrote "Liar's Poker," "The Big Short" and "Moneyball," is being interviewed by Gurley over dinner Tuesday night.

WATCH: Bill Gurley says top-tier banks underprice IPOs compared to direct listings

Tech investor Bill Gurley says top-tier banks underprice IPOs compared to direct listings
Bill Gurley: Top-tier banks underprice IPOs compared to direct listings