Open Access Senior Thesis
Bachelor of Arts
Patrick Van Horn
2020 Alexis D Paff
In this paper, I carry out an empirical analysis of the pricing volatility of direct listings as compared to traditional IPOs. Direct listings solve an efficiency problem in the US going-public market, in which well-funded, late-stage firms lack incentives to pursue a public listing, which would create liquidity for preexisting shareholders and allow for a more diverse body of public shareholders. Direct listings have been allowed on the New York Stock Exchange since early 2018, and four firms, Spotify, Slack, Asana, and Palantir, have gone public through this new listing mechanism. While underwriters are heavily involved in the IPO process, serving the role as price stabilizers after the issue goes public, direct listings do not require a formal underwriter. Investment banks are often regarded as a necessity for stabilization in the going-public process, but this paper analyzes whether or not the overallotment option and lockup agreement in traditional IPOs actually leads to greater swings in price volatility for the first 60 days after an issue goes public.
Paff, Alexis, "Are Investment Banks Helpful or Hurtful? An Analysis of Intraday Volatility in the Direct Listing Process as Compared to Investment Bank-Involvement in Traditional IPOs" (2021). Scripps Senior Theses. 1740.