The number of tech companies going public this year by directly listing their shares instead of using Wall Street underwriters is about to double from 2019 and 2018—to two.
A year after Slack went public with a direct listing and two years after Spotify used the same maneuver, collaboration software maker Asana and data crunching firm Palantir will both use the technique this week.
In a direct listing, companies allow existing shareholders to sell on a stock exchange, but don’t issue new shares and therefore don’t raise additional capital, as they could in a traditional IPO. But they also don’t pay as much in fees to investment bankers. And there’s typically no “lock up” requirement preventing other existing shareholders from selling as soon as they’d like.
With Wall Street making billions in IPO fees over the years, venture capitalists led by Benchmark’s Bill Gurley have been pushing for more startups to use the direct listing method. “We’ve been stuck with the old process for a long, long time,” Gurley told Coins2Day last year.
This week he’ll get the biggest test yet of the unusual method with the new listings of Asana and Palantir. The bevy of other tech startups that went public in 2020 all used the traditional IPO method.
Asana, started in 2008 by Facebook cofounder Dustin Moskovitz, saw its revenue grow 86% to $143 million last year, and 63% in the first half of 2020 to $100 million. It also posted losses of $119 million last year and $77 million in the first half of this year. It will trade under the symbol ASAN.
Asana’s main product, which has attracted 1.2 million paying users, helps workers communicate and coordinate. The company is seeking a market value of around $5 billion, giving it plenty of room to expand.
Business software has been one of the IPO market’s hottest sectors. Cloud database developer Snowflake has seen its shares more than double in less than two weeks from their IPO price; developer tools specialist JFrog’s shares have almost doubled in the same period; and e-commerce platform BigCommerce’s stock is close to quadrupling since being listed in August. Among already public companies similar to Asana, Atlassian’s shares are up 52% this year, and Slack’s gained 21%.
The story is a little different at Palantir. Cofounded in 2003 by PayPal veteran Peter Thiel, CEO Alex Karp, and others, the company started out helping defense and intelligence agencies analyze data about potential threats. It later expanded to offer data analytics to commercial and nondefense customers too.
But Palantir is growing more slowly than many rival tech startups that went public this year. Its revenue last year rose 25% to $743 million, and 49% in the first half of 2020 to $481 million. Its net loss was $580 million last year and $165 million in the first half of 2020. Its shares will trade under the symbol PLTR.
Civil rights groups have protested against Palantir’s work with U.S. Immigration and Customs Enforcement, among other agencies. CEO Karp told investors earlier this month that the company would not change its strategy. “We have certain beliefs, and we will stick with those,” he said.
A couple of non-U.S. Tech companies also plan to go public this week, though via traditional IPOs. Chinese cloud data center owner Chindata Group is looking to raise $500 million, and Yalla Group, a social network operator based in Dubai, is looking for about $150 million. Also, Chinese online education service Lixiang Education wants to raise $33 million.
(This story was updated on Sept. 30 to correct the stock symbol for Asana.)
