Palantir and Asana IPOs to Test the Direct Listing Process, NYSE

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Data firm Palantir Technologies Inc. and software company Asana Inc. are both set to launch their direct listing on the New York Stock Exchange on Wednesday, the biggest test yet for this still largely untested model for initial public offerings.

Among the potential pressure points for trading Palantir and Asana is when the two stocks will open and how their common key advisers will handle the process of matching buyers and sellers of two stocks simultaneously. Given the novelty of direct listings and their complicated nature, some people familiar with the offers said they weren’t thrilled that two are happening on the same day. Palantir and Asana recruited Morgan Stanley as their senior advisor and Citadel Securities LLC as their designated market maker to help oversee their debut on the stock market. This is the same team that worked on the only other two big direct ads: Spotify in 2018 and Slack in 2019.

Palantir initially planned to debut the week of Sept. 21, but due to a long back-and-forth with the Securities and Exchange Commission, it had to push its listing back for a week, according to people familiar with the matter. Asana had been planning its debut on September 30 for weeks.

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Both lists will land as investors eagerly gobble up shares of new public companies. Despite a struggling economy weighed down by the coronavirus pandemic, initial public offerings listed in the United States are likely to raise more money this year than any other – including the tech bubble years of 1999 and 2000 – if the pace IPO fever continues, bankers, lawyers and executives told The Wall Street Journal.

Going public through direct listing excludes underwriters from investment banks and means companies are not raising money for themselves. Instead, employees and early investors can sell their shares on the first day of trading.

Alex Karp, PDG de Palantir Technologies

Photo:
Thibault Camus / Associated press

The NYSE on Tuesday afternoon released so-called benchmark prices for the two stocks: $ 7.25 a share for Palantir and $ 21 a share for Asana. Silver does not change hands at the benchmark price, but the price acts as a placeholder instead of a formal IPO price and is based on recent transactions in the private market. Spotify and Slack have ended their trading debuts significantly above the benchmark prices published by the NYSE.

Palantir bankers told investors the shares could start trading around $ 10 each, the Journal first reported last week, which would give the company a fully diluted valuation of nearly $ 22 billion. dollars. Asana’s market cap is expected to be closer to $ 5 billion to $ 6 billion, one of those familiar with the matter said.

In a direct listing, there is no matching of buyers and sellers the day before, as occurs in a traditional IPO. Instead, the company just floats its shares in the open market, which means finding the right price at which to open the stock for trading can be time consuming, traders say.

When Spotify listed its shares via a direct quote – the first large company to go public by this method – its stock did not open until 12:43 p.m., much later in the day than traditional IPOs typically start to go. to negotiate.

Because openings can take so long, the current plan is to begin the price discovery process for both companies at the same time, shortly after the market opens, according to some people familiar with the matter. The other option – staggering the price discovery process – would mean a business might not open until late afternoon, one of those people said. The person added that even if both businesses go through the process simultaneously, neither is expected to open until at least 11:30 a.m., and either or both could be delayed until around 1 p.m.

Even though price discovery for both companies begins around the same time, one of the people familiar with the deals said the goal is to separate the companies’ first transactions by an hour or two, in part to avoid stock market volatility.

As there is not a long history of direct quotes and the process has not been extensively tested, some advisers have expressed frustration that if there is a problem with trading one or the other shares, it will not be clear whether the direct listing process has failed or whether the volume of trade is to blame.

The shares will make their debut in a market where investors have been hungry for new issues, especially tech companies. Even in a traditional IPO like data warehousing company Snowflake Inc.,

underwriters struggled to find a price that will not fluctuate dramatically when trading opens. Due to strong investor demand, Snowflake ended up pricing stocks well above its initial target range of $ 120 each. Snowflake stock soared again in its public debut, trading at $ 319 shortly after it opened. It is currently trading around $ 250 per share.

Write to Corrie Driebusch à [email protected] and Maureen Farrell at [email protected]

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