Tag: google

More On Direct Listings

Regular long-time readers of this blog might know that I’m not a big fan of IPO pops (I’ve written about them at least four times so far: one, two, three and four). You can think of this as Number Five, though this is specifically about Direct Listings.

In case you don’t have patience to click through and read my posts, what is the big deal about direct listings? And what is the problem with traditional IPOs? To put it simply, companies looking to raise capital through IPOs are playing a one-time game (you only do an IPO once), while companies that are investing in them are playing a repeated game (they participate in pretty much every IPO that comes on the market – ok may be not WeWork).

This means that investment banks, which stand between the buyer and the seller in such cases, have an incentive to structure the deal to favour the (repeated) buyers, and they price the IPO conservatively. This means that when the company actually lists on the market, it usually does so at a price higher than the IPO price, resulting in a quick win for the IPO investors.

This is injurious for the original investors in the company (founders, VCs, employees) since they are “leaving money on the table”. A pop of 10-20% is considered fair game (a price for the uncertainty on how the market will react to the IPO), but when MakeMyTrip lists 60% higher, or Beyond Meat lists 160% up, it is a significant loss to the early shareholders.

Over the last few months (possibly after the Beyond Meat IPO), Silicon Valley has woken up to this problem of the IPO pop, and suggested that the middleman (equity capital markets divisions of investment banks) be disintermediated from the IPO process. And their vehicle of choice for disintermediation is the direct listing.

A direct listing is what it is. Rather than raising fresh capital from the market, the company picks an auspicious date and declares that on that date its stock will list on the exchanges. The opening auction in the exchange on that day sets what is effectively the IPO price, and the company is public just like that.

Spotify was among the first well-known companies in recent times to do a direct listing, when it went public in 2018. Earlier this year, Slack did a direct listing as well. Here is Benchmark Capital’s Bill Gurley (a venture capitalist) on the benefits of a direct listing.

Direct Listing is all well and good when a company doesn’t have to raise capital. The question is how do you go public while at the same time raising capital (which is what a traditional IPO does)? Slack and Spotify were able to do the direct listing because they didn’t want capital from the IPOs – they just wanted to offer liquidity to their investors.

The New York Stock Exchange thinks it can be done, and has proposed a product where companies can use the opening daily auction to price the new shares being offered. There are issues, of course, about things like supply of shares, lock-ups, price support and so on, but the NYSE thinks this can be done.

NYSE’s President Stacey Cunningham recently appeared on the a16z podcast (again run by a VC, notice!) and spoke eloquently about the benefits of direct listing.

The SEC (stock regulator in the US) isn’t very happy with the proposal, and rejected it. Traditional bankers are not happy with the NYSE’s proposal, either, and continue to find problems with it (my main source of this angst is Matt Levine, who is a former ECM Banker and who thus has solid reasons as to why ECM Bankers should exist). In any case, the NYSE has refiled its proposal.

So what is the deal with direct listings?

In a way, you can think about them as a way to simply disintermediate the market. The ECM Banker, after all, is a middleman who stands between the buyer (IPO investor) and seller (company raising capital), helping them come up with a smooth deal, for a fee. The process has been set for about 40 years now, and has become so stable that the sellers think it has become unfair to them. And so there is the backlash.

Until now, the sellers were all independent entities with their own set of investors, and so they were unable to coordinate and express their displeasure with the IPO process. The buyers, on the other hand, play the game repeatedly, and can thus coordinate among themselves and with the middlemen to give themselves a sweet deal.

The development in this decade is that the same set of VC investors invest in a large number of go-to-public companies, and so suddenly you have sellers who are present across deals, and that has changed the game in a sense. And so direct listings are on every tech or investing podcast.

Among the things I wrote in my book (which came out a bit over two years ago) is that one important role that middlemen play is to reduce uncertainty and volatility in the market.

One concern with direct listings is that there can be a wide variation in the valuations by different players in the market, and the opening auction is not an efficient enough process to resolves all these variations. The thing with the Spotify and Slack listings was that there was a broad consensus on the valuation of these companies (more in line with public company valuations), a set of investors who wanted to get in and a set of investors who wanted to get out. And so it all went smoothly.

But what do you do with something like WeWork? The problem with private market valuations is that with players like SoftBank, they can be well divorced from market realities. In WeWork’s case, the range of IPO valuations that came up differed by an order of magnitude. And that kind of difference is not usually reconcilable in one normal opening auction (imagine a bid of 8 billion and an ask of 69 billion, and other numbers somewhere in between) without massive volatility going forward. In that sense, the attempted traditional IPO did a good job of understanding demand and supply and just declaring “no deal”. “No deal” is usually not an option when you do a direct listing.

OK I’ve written a lot I know (this is already 2X the length of my usual blog posts), so what do I really think about IPOs? I think all this talk about direct listings will shift the market ever so slightly in favour of the sellers. Companies will follow a mixed strategy – well known companies (consumer brands, mostly) with stable valuations will go for direct listings. Less well known companies, or those with unstable valuations will go for IPOs.

And in the latter case, I predict that we will move closer to a Dutch auction (like what Google did) among the investors rather than the manual allocation process that ECM bankers indulge in nowadays. It will have the benefit of large blocks being traded at time zero, at a price considered fair by everyone, and hopefully low volatility.

Customised Google Doodle

I’m very impressed with Google for having customised a Doodle for my birthday. I’m always logged in to Chrome, and I’ve told Google Plus when my birthday is, so it’s rather trivial to do this. However, that they have done this is rather impressive, and I’m happy with them.

Customised Google Doodle

I’m also happy with most financial institutions I have a relationship with, for since morning my mailbox has been flooded with messages from all these institutions wishing me a happy birthday. I don’t know what information other e-commerce sites have about be, but not many of them have bothered to wish me so far  (not that I’m complaining). The only exception is FabFurnish (which is bizarre since I’ve never bought from them) which has not only wished me but also sent me a discount code!

This whole business of Customer Relationship Management is bizarre, I tell you!

Poetry

I’ve never really got what the big deal about poetry is. I have friends on facebook and google+ who share bits and pieces of poetry that they like, and shag about it. And most of the time I never get why it’s so hifunda. Yes, I do like some poetry. Like I think Vikram Seth’s The Frog and The Nightingale (which appeared in our 10th standard textbook) is an absolute classic. I can still recite the few stanzas of The Highwayman which I had mugged up for an elocution competition in school. I don’t however, get “modern poetry”, the kind without any rhyme or rhythm. And so, faced with a deluge of such literature, I have been trying to figure out what the big deal about poetry is.

Think about the ancient classics and texts. Think about the Vedas, the Ramayana, the Mahabharata, the Iliad, the Odyssey. All of them written in verse. Think about the hundreds of thousands of Vedic schools spread all across India, some of them functional even today, where students did nothing but just mug up to recite the Vedas. Think about the ancient Indian oral tradition, which has managed to preserve the Vedas and our epics in something close to their original forms even today. Can you imagine mugging up all the words of a modern classic, and remembering it well enough to deliver verbatim to your students? I guess you can’t, and you don’t need to, for we have the luxury of writing, and written records. But what in those days in ancient India, where there was no paper? How have such long and magnificent texts survived our oral tradition across centuries? The answer is poetry.

Poetry is a concept that dates back to the times when there was no writing. It was a means to make it easy for someone to memorize a piece of text. By introducing concepts such as rhyme and rhythm, of allegories and metaphors, the poets would make it easy for the transmitters to remember the poems. I’m told (for I haven’t read them firsthand) that the Vedas also have several built-in checksums, to enable easy rememberance, in case a part of a verse gets lost in memory. By this insight, poetry is basically a means to render text in a format that makes it easy for you to remember stuff. That, truly, is the sheer beauty of poetry. An ancient concept designed to transmit, across generations. A concept that was essentially rendered redundant with the coming of writing, because of which it had to reinvent itself. And I’m not sure how successful that reinvention of the form has been (though given the number of people who claim to love poetry, I must say the reinvention has been rather successful).

Now, think of your school textbooks, any subject. And think about how many lines from the prose you can remember verbatim. Exactly as it was in the text. I would guess the answer would be something close to zero, which is the answer in my case. And now think about the poetry you read back in school, and how much of that you can remember. I would assume the number is rather higher. I may not remember complete poems, but I remember at least stanzas from several of the poems I studied back then. For example, I can recite verbatim several of the dohas written by Kabir and Abdurrahim Khankhana, which were part of our school syllabus as far back as when I was in 7th standard. Now think about it – how is it that I can remember entire lines, written in a language I was hardly comfortable with back then, in a dialect I hardly understood, almost twenty years later? It is down to sheer poetry! The rhymes and rhythms and allegories and puns which all make it so easy to remember!

So what is poetry? It is essentially a form of writing which is easy for the reader to memorize, and remember ages later in order to transmit. So what is good poetry? It is a piece of writing, written in a form that sticks in the reader’s head, which possesses him, to the extent that he remembers the words in their entirety, and not just the essence. The thing with great prose is that it enables the reader to easily grasp the idea it is trying to convey. With poetry, it is not just the idea that is to be conveyed, it’s also the expression. And how good a poem is depends on how successful it is in making the expression stick in the reader’s head.

In general, I must admit, I still don’t get ‘free verse’. I think it’s just prose written with lines broken in random places that the “poet” fancies. While they might have some nice puns or allegories, in most cases it is impossible to remember the exact words, for there is little that ties sentences, that creates checksums, that enables readers to remember the expressions. I still like simple good old poetry, though, but few people write that any more. I’ll leave you with a stanza from one of my favourite poems which I still remember:

Once upon a time a frog
croaked away in bingle bog
Every night from dusk to dawn
He croaked awn and awn and awn

LJ

Today, maybe for the first time in over two or three years, I logged in to Livejournal. Nowadays, at my home, LJ is for the exclusive use of the wife, and I haven’t been there at all since moving my blog here. And the first thing I did was to look at my LJ Friends page.

There was a post about ubuntu by randomwalker, which I put well left to. And then there was a friends-only post by al_lude  (no use linking that here since you won’t be able to read it unless he’s friended you on LJ). And now I know the one thing I’ve been missing about LJ ever since I moved here. The friends-only post!

I realize that in the last couple of years or so, I’ve been writing less because all those posts that would’ve been written as “friends only” posts on LJ are now not written at all. I do intend to re-start writing that kind of stuff. I’m thinking of Google Plus as a medium for doing that. For that one reason I really hope G+ takes off and more people begin to use it, so that it becomes more meaningful.

Google Plus – Initial thoughts

Hareesh sent me an invite for Google Plus early on Wednesday morning. Thinking it’s another stupid thing like Wave, I ignored it. But feedback from twitter revealed that the product did show some promise, so later that evening I joined it. I’ve got some 150 friends already (god knows how long it took me to get to so many with either Orkut or Facebook), though I haven’t started using it yet. Some initial thoughts:

  • I like the concept of circles, and that it’s so easy to segregate your friends. This has become a huge problem in social networking, especially after all uncles and aunties got on to facebook. So far I’ve made an attempt to classify all my contacts into disjoint circles of “friends” “family” and “acquaintances”. I also like it that circles need not be disjoint, so I can make an exception to my rule and put the wife in both “friends” and “family”
  • I like that it’s a directed graph. That you can follow the public posts of someone without them having to follow you back. I don’t know why but I simply like this. I hate putting friendship requests and waiting endlessly for responses and stuff. So this directed stuff makes a lot of sense for me.
  • I need to find out how to import my blog there. Then I can close my blog feed on facebook which is infested with uncles and aunties. On Plus, they’ll be safely tucked away in the “family” circle which won’t be able to see much.
  • I don’t like being the “cut-vertex”. I don’t like being the one guy who links two subgroups of a larger group. On a similar note, I don’t like to go out simultaneously with disjoint sets of friends (i.e. two groups that didn’t know each other previously). I feel too tense trying to make sure everyone’s comfortable and clued in on what’s happening. Similar with conversations on facebook. So yeah, I’ll probably segregate my circles further and have more cliquey groups.
  • Again, directed graph means I can peacefully put ignore to people, without appearing rude. On FB, if some uncle comments and I don’t respond, he might take offense, and I’ll be cognizant of the fact that he takes offence. And I force myself to reply. On G+, if i”m not following him, I can peacefully put well left. Like I sometimes do to @Replies to me on twitter from people who I don’t follow

So seems promising. Too early to say if it’ll make me give up both twitter and facebook. I’m sure I won’t give up twitter for sure. Let’s wait and see.

Moron the corruption issue

Following my previous post and comments and countercomments and discussions on twitter and facebook and google groups and various other forums, I’ve been thinking about this whole corruption thing. Random thoughts. The kind that comes to you when you’re traveling across the city by auto on a hot summer day, watching the world go by.

Ok so this is for the people who claim that the supporters of Anna Hazare are a large enough group that they probably represent “most of the people”. If this were the case, we have a simple solution to corruption – all these worthies can band together in the form of an “anti corruption party” (when was the last time we had a political party being formed on a solid ideology?) and contest the next elections. And if they can work hard, and ensure that they keep up the kind of efforts they’ve started, they’ll soon be ruling us. And hopefully they’ll continue with their zeal and be actually able to eradicate corruption. (on my end, I promise that if a credible party gets formed with an anti-corruption stand, I’ll get over my NED, get myself registered as a voter and vote for them).

But there are reasons to doubt something like this will happen. A look at the list of nominal supporters Anna Hazare got suggests that a lot of people were there just to be seen and get footage, rather than really wanting to weed out corruption. Again, given the political spectrum across which Hazare’s supporters last week came from, it might not be that easy an idea to form this “anti-corruption party” that I suggested.

Thinking about it further, there is a scary thought – that a large part of our population is actually pro-corruption. And looking at the political parties across the spectrum, it doesn’t sound implausible. So if a large number of people are actually pro-corruption, what are we to do?

Let me put it another way. How many people do you think are really anti-corruption? On all fronts? How many people do you think exist in India who haven’t paid or received a single bribe, however small that might be? Basically I want to estimate the number of people who are against corruption of all kinds, and my sense is that this number is likely to be small indeed.

I think one needs to think about this further before actually figuring out how to weed out corruption. From what I’ve read so far the Lok Pal bill simply adds one extra protective layer, and am not sure of its effectiveness. More about this in another post.

Punjabi Muslims

So earlier today I was reading this profile of a Harvard professor that Chan had shared on Google Reader, and I came across this name called Iqbal Dhaliwal. The name immediately rang a bell, and I realized I’d come across this name long long ago in the Competition Success Review (yes, I admit I used to read that ) when he topped the civil services exam.

So one of my hobbies is to try find out about a person’s origins and ethnicity given his/her name. Like I once figured that this colleague is of Danish descent because his surname ends with -sen while the more common spelling of that name is -son. And so I was trying to figure out where  Iqbal Dhaliwal came from. It was clear from the first name that he’s Muslim. And the last name, I thought, sounded Punjabi.

And then my thought process went something like this:

First name Muslim, last name Punjabi-sounding… So is he a Punjabi Muslim? But then, I don’t know any Punjabi Muslims. Do there exist any Punjabi Muslims at all? Hey, wait a minute, I remember reading somewhere that the majority of people in Pakistan speak Punjabi. So there must exist Punjabi Muslims. But I don’t know any.. I don’t know any Punjabi Muslims but there are lots of them in Pakistan. Yeah, I don’t know any because all of them are in Pakistan. Yes, all of them are in Pakistan, most of them at least!

I know Kannadiga Muslims, Bengali Muslims, Gujarati Muslims, Kashmiri Muslims and Muslims from UP. But I don’t know any Punjabi Muslims. Because there are no Punjabi Muslims in India. Because ALL of them went to Pakistan. Tells you how much of an impact partition had in the Punjab,  compared to anywhere else in India.

Temple Towns

Someone (a friend’s friend I guess) had written in the comments of a shared post on Google Reader about how he generally feels safe in tourist places. Locals there have an incentive to be nice to tourists, he said, since they depend upon the latter for livelihood. And so elements that would make the place unsafe for tourists would be weeded out.

While I agree with this hypothesis (in general) I realize that the same need not hold true for temple towns or other similar places where people go for religious reasons. There the locals have no incentive to be nice to tourists, pilgrims rather – the Pilgrims will come no matter what, and the place will continue to Progress.

So if you are evaluating holiday options from a safety perspective you are likely to be better of choosing the secular option.

Making guest list

So last night I sat down to do the presumably fun task of preparing my wedding guest list. This was just the first cut, where I just put down the names of people I want to invite in an excel sheet. In the second cut, I’ll parse the sheet and figure out how each person on the list should be invited – personally, or on phone, or email, and so on.

So there can be two kinds of error while making such a list – errors of omission and errors of commission. The probability of error or commission is quite low. After all there aren’t too many people who you explicitly don’t want at your wedding. And if there exist any such people, you will remember that only too well while putting their names down in the invite sheet.

Errors of omission is what I’m concerned about. There have been times in the past when people have gotten married, and I haven’t had a clue. It’s a different matter about whether I’d’ve gone or not, but I know that there is scope for hurt feelings if certain people are left out of the list. So one must be careful.

The problem is that I’m currently not in touch with a lot of these people. I would’ve been good enough friends with them at some point of time in life that I’d want to invite them to my wedding. But the fact that I haven’t kept in touch means I may not remember their existence, but when eventually they see my wedding pics on facebook it might result in a kinda hurtful “congrats” message.

The other question I must ask is that if I’m prone to forgetting about someone’s existence, if they are worth being invited at all. That I’ve forgotten about them means that obviously they are quite low in my list of people I want at my wedding. So am I generally paining myself by trying to remember people who I wouldn’t normally remember?

So far the easiest list I’ve made is from my batch of people from IIMB. We have a google doc with everyone’s names and personal details. So one parse through that meant I wouldn’t forget anyone’s existence. Much peace ensued. The problem is similar lists don’t exist for my other social networks. Anyway I’ll try my best.

Tangentially, another issue is about how “forcefully” I invite certain people who don’t live in Bangalore and have to fly down for my wedding. For a variety of reasons I happened to bunk their weddings, and now it’s a little embarrassing to insist that they be there.

PS: This old post of mine, I think, is pertinent.