Gurley argues IPOs should match supply and demand through bidding, calling current handpicked pricing process ignorant.
“So if you ask any first year comp sci student and first year finance student to write a model of how an IPO should work, you would allow everyone to bid and you would award the shares to the highest bidder. It's just not like, it's not, it should just be tautological.”
All-In Podcast
“So you have low barriers to entry but you have very high barriers to exit”
All-In Podcast
“So you have low barriers to entry, but you have very high barriers to exit. And so felt that it was just systematically set up to rise and crash, rise and crash.”
Gurley argues IPO pricing relies on human guessing rather than modern market mechanisms.
“And the price and allocation are determined by humans just guessing, which makes no sense whatsoever in the modern age.”
Gurley cites IPO underpricing totaling $6B in 2018, $7B in 2019, and over $34B this year.
“In in in 2018, it was 6,000,000,000. In 2019, it was 7,000,000,000. This year, it's gonna be over $34,000,000,000 in one day giveaways.”
Gurley argues SPAC market emerged because traditional IPO underpricing was worsening.
“I think one of the big reasons the SPAC market opened up was because the underpricing was getting worse and worse and worse.”
Gurley contrasts past Microsoft dominance with today's five to seven competing monoliths creating more startup opportunities.
“When I got into venture, every startup presentation ended with what are you going to do when Microsoft does this? Right.”