Direct Listings Fall Out Of Favor As Companies Utilize SPACs, IPOs

Direct listings have been having trouble living up to the hype as several recent ones have slumped, Bloomberg reported.

Among the biggest names that faltered was Coinbase, which went public in April and then faded afterward. It is now hitting prices below even its “reference price,” according to Bloomberg. Coinbase skeptics hadn’t thought Coinbase would fail to hit that metric.

Meanwhile, Squarespace and ZipRecruiter’s direct listings were also among those that did not do as well, Bloomberg reported. Squarespace was able to get ahead of its reference price in its first session, while ZipRecruiter’s start was less than many of its traditional initial public offering (IPO) peers.

Regular IPOs, in contrast to direct listings, have been doing well again, according to Bloomberg.

Compounding the issue for direct listings has been the fiery trend of special purpose acquisition companies (SPACs), which were doing well long enough to push direct listings off their pedestal, Bloomberg reported.

Direct listings were popularized a few years ago when music streaming service Spotify did one, going public without hiring a list of banks to help it with the marketing and selling of shares, according to Bloomberg. Direct listings were supposed to be a way for companies to go against the usual banking fees and hallmarks of a process criticized as a way to prioritize Wall Street’s favorite firms.

The direct listing slumps happened at the same time the U.S. saw a pullback in equities in April and May of this year, Bloomberg reported.

IPOs hit a new record of $171 billion in under six months of 2021, PYMNTS reported. That amount comes out to more than the entire 2020 total of $168 billion.

Corporate valuations have been up throughout the pandemic, with stimulus checks and other factors like low interest rates contributing to the increases, which has led to a new wave of speculative furor that benefited multiple types of companies going public.