Why Wall Street is Losing Control of Tech IPOs—Data Sheet

In May, before Uber went public, I told you I was bored with IPOs.

Michael Moritz, among the most consistently successful venture capitalists of his generation, has taken my argument a step further: He is predicting the end of a certain kind of IPO altogether.

In a commentary in The Financial Times, the canny investor who backed Yahoo, Google, and oodles of others, points to the so-called direct listings of business messaging app Slack and music streamer Spotify as proof that the days of investment-banker-led initial public offerings are over. He notes that we are approaching the 15^th anniversary of Google’s IPO, an attempt at a certain kind of auction that would cut out the relatively useless role of bankers. Though Google went public just fine, the auction concept failed to catch on, and no important company used the method of going public again.

Now, with the direct listing concept, startups have a new way of going around bankers. (Moritz has a dog in this fight: Lower fees to bankers mean greater proceeds for startups and possibly better returns for investors.) In direct listings, companies simply place existing shares on the market and allow them to start trading. Moritz sees a future where this is the norm. In that scenario, bankers would be left to focus on breaking up companies like Viacom and CBS. And then putting them back together. And then breaking them up again. And so on.

I suspect that direct listings will continue to surge so long as companies that already have gorged on ample funding and don’t need to raise more in an IPO continue to go public. The day will probably come after that when capital is scarce and traditional IPOs are in vogue again. And then investment bankers will be able to rest easily about being able to afford their summer and winter vacation homes.

Adam Lashinsky

On Twitter: @adamlashinsky

Email: [email protected]

NEWSWORTHY

How the cookie crumbles. While Apple and Mozilla have proposed strict privacy enhancements for their web browsers, including blocking so-called cookies used to identify and track individual web surfers, Google offered its own solution that stopped short of killing the cookie. Using crypto tokens and artificial intelligence could improve privacy protections, instead, Google said. Separately, Google said it would not name its upcoming update of Android after a dessert or treat, but instead would just call the software "Android 10." And in yet another part of the Googleplex, the company said it took offline more than 200 YouTube channels that were blasting misinformation about the Hong Kong protests.

You like me. Right now, you like me. Pop star Taylor Swift decided to launch her new album, Lover, on streaming services like Spotify immediately on Friday, instead of holding back on the online release as she has in the past. Streaming accounts for 80% of U.S. Music listening now, making it hard to bypass (here's the album on Spotify). Swift also says that next year she will re-record songs from her early albums to gain greater control–and royalties–from her previous publisher, Big Machine.

Hang up. The attorneys general of all 50 states and the District of Columbia got all of the largest phone companies to agree to take steps to wipe out the scourge of robocalling. AT&T, Verizon, and other carriers will offer free call-blocking systems and make other free apps available.

Destroy your own creature. The rumors were true and then some. Virtualization software king VMware on Thursday said not just that it was acquiring Dell Technologies sister company Pivotal Software (for $2.7 billion) but also cybersecurity specialist Carbon Black (for another $2.1 billion). Pivotal is being acquired for $11.71 per share, a blended price which pays $15 to Class A holders, the same price as in last year's IPO. Elsewhere on Wall Street, Salesforce said its quarterly revenue rose 22% to $4 billion, better than expected. Shares of Salesforce, up just 8% in 2019, gained another 7% in pre-market trading on Friday. (Update: Corrected offer price for Pivotal relative to its IPO price.) 

Pocket money. Speaking of leaks, we are just a few weeks away from Apple's annual September iPhone event and the rumors are flying. Expect three models, with two "Pro" editions that get a third camera and one standard upgrade, which will get two, Bloomberg reports. Also on deck for this year are iPad updates and a 16-inch laptop, possibly/hopefully with a new keyboard design. In other gadget news, Bose introduced an updated portable smart speaker, the $349 "Portable Home Speaker," with support for digital assistants from Google and Amazon.

The lightness of being a beginner again. A couple of departures from the executive suite on Thursday. HP Inc. Boss Dion Weisler will resign due to a family health matter. Enrique Lores, the head of HP's printing and imaging unit, takes over. And conspiracy theorist Patrick Byrne, CEO of Overstock, stepped down after a bizarre series of statements and the revelation that he had been romantically involved with Russian agent Maria Butina. Board member Jonathan Johnson becomes interim CEO. In other boardroom shenanigans, Oracle is apparently suing itself, sort of, over whether chair Larry Ellison and CEO Safra Catz overpaid for NetSuite, a company Ellison controlled when Oracle bought it for $9 billion in 2016.

What do you knowz about the newz? Rupert Murdoch's News Corp. Is apparently creating a new news web site and app called "Knewz" to compete with Google News and offer publishers a better deal. Maybe they should start with a better name?

FOR YOUR WEEKEND READING PLEASURE

A few longer reads that I came across this week that may be appealing for your weekend reading pleasure:

NerdWallet’s CEO on Navigating the Shift from First-Time Founder to Seasoned Exec (First Round Review)
“Our story’s somewhat unusual. I was a tech outsider. Coming from the world of finance and hedge funds, I didn’t know a single engineer 10 years ago. And while all the other startups around us were raising heaps of money, we bootstrapped and didn’t fundraise until we were six years in."

Split Screen (The Verge)
The crowdfunded phone of the future was a multimillion-dollar scam.

Mission Jurassic: Searching for dinosaur bones (BBC)
The stench was unbearable. The hulking mass of dead dinosaur had lain on the sandbar now for over a week in stifling heat, half-buried among the decaying vegetation and sediment.

History’s Greatest Horse Racing Cheat and His Incredible Painting Trick (Narratively)
In the sport’s post-Depression heyday, one audacious grifter beat the odds with an elaborate scam: disguising fast horses to look like slow ones.

FOOD FOR THOUGHT

The war against Airbnb rages on, with cities across the globe enacting new restrictions all the time. But enforcing those restrictions isn't always easy, so, as Jospeh Cox reports for Vice's Motherboard site, a "cottage industry of tech companies" have sprung up to help regulators crack down by, among other things, sussing out the actual addresses of Airbnb listings.

A current contractor leaked Motherboard an internal training video for those working for Host Compliance. When working on a task, contractors are presented with a Google Maps style interface, with yellow and orange pins on top of buildings, according to the video. Orange pins are ones that the automatic part of the system has determined are likely rental properties, the video narrator says. Contractors can use people search tools such as WhitePages.com embedded within the Host Compliance panel to conduct searches. Workers can then filter potential matches for the correct address by property owner name if they have that information, before selecting which address they believe the Airbnb or other listing is from. At the end, contractors are asked to provide evidence of their work, be that screenshots or links.

IN CASE YOU MISSED IT

DoorDash and Amazon Change Their Controversial Tipping Policies By Danielle Abril

Apple Card Review: A (Mostly) Rewarding Way to Pay By Aaron Pressman

Corporate Diversity Efforts Often Leave Out an Important Group: People With Disabilities By Nancy Geenen

China Hits Back After Twitter and Facebook Block Pro-Beijing Content By Eamon Barrett

5 iPhone 11 Questions That Apple Needs to Answer By Don Reisinger

Huawei Launches New A.I. Chip As Company Enters ‘Battle Mode’ To Survive By Eamon Barrett

7 Proven Ways to Get Ahead at Work By Anne Fisher

BEFORE YOU GO

The original movie in the Matrix trilogy remains an all-time classic of sci-fi cinema, but the second and third installments were considerably less than that. Now comes news from Hollywood that actors Keanu Reeves and Carrie-Anne Moss plus writer/director Lana Wachowski have signed on to craft a fourth movie. Hope it's better than the fourth Jason Bourne.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Coins2Day newsletters.