Palantir and Asan’s Duel IPO Test Direct-Listing Process, NYSE

Both data firm Palantir Technologies Inc. and software company Asan Inc. are set to begin their direct listings on the New York Stock Exchange on Wednesday, the biggest test for a still largely untapped model for initial public offerings.

Both of the possible pressure points of trading in Palantir and Asan are when will the stock open and how will their shared lead advisors manage the process of matching the buyers and sellers of the two stocks together. Given the new listing of direct listings and their complex nature, some people close to Prasad said that they are not thrilled that the two are happening on the same day.

Both Palantir and Asan have listed Morgan Stanley as their principal advisor and Citadel Securities LLC as their designated market maker to oversee their stock market debut. This is the same team that has only worked on the other two major direct listings: Spotify in 2018 and Slack in 2019.

Palantir was initially planning to start the week of September 21, but due to back-and-forth with the Securities and Exchange Commission, according to people familiar with the matter, its listing had to be brought back for a week. Asan was planning to debut on September 30.

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Investors will be more keen on shares of new public companies. Despite the economy struggling by the coronovirus epidemic, initial public offerings listed in the US are likely to raise more money this year than any other – including the tech-bubble years of 1999 and 2000 – if the IPO’s fever momentum persists, So bankers, lawyers and officials have told The Wall Street Journal.

Going public through a direct listing skirt investment-banking underwriter and that means companies do not raise money for themselves. Instead, employees and early investors can sell their shares on the first day of trading.

Alex Karp, Chief Executive Officer of Palantir Technologies


Thibault Camus / Associated Press

The NYSE on Tuesday afternoon published so-called reference prices for two shares: $ 7.25 a share for Palantir and $ 21 a share for Asan. Money does not change hands on the reference price, but the value acts as a placeholder in exchange for a formal IPO price and is based on recent private-market transactions. Both Spotify and Slack ended their trading debut well above the reference prices published by the NYSE.

Palantir’s bankers have told investors that the shares could start trading near $ 10, the Journal reported last week, giving the company a fully diluted valuation of about $ 22 billion. Asan’s market capitalization is likely to be close to $ 5 billion to $ 6 billion, one of the people familiar with the matter said.

In a direct listing, buyers and sellers do not match at night, as in a traditional IPO. Instead, the company only floats its shares in the open market, meaning that the true price at which it can take a long time to open a stock for trading, traders say.

When Spotify listed its shares via direct listing – the first major company to go public through this method – its stock did not open until 12:43 pm, usually later in the day than in traditional IPOs. Business commences.

Since the opening may take so long, the current plan is for both companies to start the price-discovery process, shortly after the market opens, according to some people familiar with the matter. Another option to stagger the price-discovery process — it would mean a company might not open until late afternoon, one of those people said. The person said that even if both companies go through the process simultaneously, neither is likely to open until at least 11:30 pm, and one or both may be delayed until 1 pm.

Even though price discovery for both companies starts around the same time, one of the people close to Prasad said that the goal is to set the companies’ first trades an hour or two apart, partly from the stock-market To prevent instability.

Since direct listings do not have a long history and the process has not been extensively tested, some advisors have expressed disappointment that there should be anything wrong with trading in any stock, it would not be clear that direct-listing. Whether the process failed or not is to blame the sheer volume of business.

Stocks will make their debut in a market where investors are crowded for new issues – especially from tech companies. Even in traditional IPOs like data-warehousing company Snowflake Inc.

The underwriter has struggled to find a value that won’t swing dramatically in early trading. Due to high investor demand, Snowflake ended up pricing shares at $ 120 a price over its initial target range. Snowflake’s stock still rose to its public debut, peaking at $ 319 shortly after opening. Currently it is around $ 250 per share.

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

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