Venture capitalists warn start-ups of IPO risks in San Francisco meet

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Venture capitalists warn start-ups of IPO risks in San Francisco meet

On Tuesday, the 1st of October 2019, a perspicacious bunch of venture capitalists had invited more than 100 start-ups seeking financing in a bid to ramp up their efforts amid a dramatic turn of event for global economic health that had been deteriorating at a much quicker-pace than anticipated in context of Trump’s trade war with Beijing, while the venture capitalists seemed to be seeking a way to discourage start-ups from entering public trading through IPOs.

Besides, a dozen of venture capital firms which had sponsored Tuesday’s (October 1st) San Francisco meet, urged invited start-ups which would likely to file for IPOs next year, to enter public trading through a direct stock exchange listing instead of IPOs, which barely offer a satisfactory return for start-up firms.

In point of fact, a direct listing refers to a less popular pathway to enter public trading without issuing new shares or raising new funds, while a traditional initial public offering required underwritten of investment banks.

Meanwhile, referring to a flurry of downside risks involved in traditional IPOs, one of the advocates of direct listing, head of Benchmark Capital partner, Bill Gurley, said late on Tuesday (October 1st), that the investment banks hired to oversee the IPOs had long been “fleecing” start-ups by pricing their IPOs at a lower price so they could pop up in the first trading day, which usually benefits clients of the investment bank who could buy the shares at an initially offered price and could throw the shares away after gaining profit, eventually leading to an abrupt downfall of start-ups’ share prices, values of which sometimes take years to reach their initially offered price range.