The TechCrunch Exchange: What's an IPO to a SPAC?

Alex Wilhelm

The TechCrunch Exchange newsletter launched this morning. Starting next week, only a partial version will hit the site, so sign up to get the full issue.

Welcome to The TechCrunch Exchange! I’m incredibly excited that this newsletter is finally in your hands. There’s so much to chat about, dissect and grok. We’re going to be very busy.

What will we do each Saturday? First, we’ll expand on the themes that The Exchange covers for Extra Crunch on weekdays. We’ll also run through key startup-related news from the public and private markets. Our goal is to stay firmly abreast of the biggest stories in the realms of startups and money.

Another way we’ll use this newsletter is to provide a space to share interviews, details and stories that didn’t fit neatly into a piece, but really deserve their own time all the same. If you like what TechCrunch reports and want more, this missive will have it.

And finally, we’ll take a little time at the end for something fun. We’re talking about money on a day off, so we deserve some joy to go along with the math.

Sound good? Let’s jump in.

Coinbase's future IPO

Coinbase is expected to go public in 2020 or 2021, with most expecting its filing early next year. Though given how hot the IPO market is today (more here), perhaps we’ll see the document sooner rather than later.

Regardless of when, the Coinbase debut will be a big deal, providing a booster shot of cash to investors who put over $500 million into the startup and crypto as a thesis. For you and I, the IPO will also mean an S-1 filing chock full of notes about how the crypto space looks for a mature trading platform.

But there’s another company in Coinbase’s space that doesn’t intend to go public: Binance. The Exchange caught up with its voluble founder, CZ, on Friday to chat about the possible Coinbase IPO. According to the CEO, a Coinbase debut would be “very good for the [crypto] industry,” which makes sense; if Coinbase can go public it would lend credibility to its market in a way that few other business transactions can.

But Binance, which funded itself partially through a 2017 ICO, plans on staying private. CZ says because his company has largely not raised capital from traditional sources, it doesn’t have to answer to investors. This means it isn’t pressured to go public or make money folks happy in other ways.

Like charging more for its products, CZ posited. Companies that raise extensive external capital have an “ethos” to maximize their rates so that they can “maximize shareholder value,” he said. In CZ’s view, Binance doesn’t have to do that so long as it keeps making money and doesn’t run low on cash.

Private commerce without exit events feels strange because it locks up shareholder value — external investors aside. Still, the crypto world is providing us with a live business case of two competing philosophies regarding how to run a business; one following a more traditional venture approach and one building off the back of a newer model.

Which will come out on top? It’s not clear, but the eventual Coinbase S-1 is going to be big in helping us better understand one half of the question.

Market Notes

  • Technology shares sold off as the week came to a close. A bullish run that helped tech stocks reach new records is cooling off in the face of earnings from major firms like Microsoft, Intel, Twitter and others. Apple, Alphabet and Facebook report next week.

  • Earnings clouds are on the horizon. Lost in the drafts this week are notes from myself about how Twitter’s lackluster ad revenue is a possible negative signal for Facebook’s impending Q2 results, while Microsoft Bing’s slack Q2 could bode poorly for Alphabet’s own Q2 performance.

  • European VC was somewhat garbage last quarter. After The Exchange dug into globalU.S. and sector-specific Q2 venture capital results, we have one final data set. This time it concerns Europe. Tech.eu and Crunchbase News (my alma mater) found that European startups raised about $17 billion in the first half of 2020, the continent’s lowest result since the second half of 2018. Q2 itself was the smallest quarter in venture dollar terms since at least Q2 2019. Yuck.

  • Recent IPOs stay strong. Vroom is still up 127% from its $22 IPO price, nCino is up 134% from its $31 IPO price and Lemonade is still up 174% from its IPO price of $29. GoHealth is down from its $21 per-share IPO price, but it is the exception to the rule. Jamf is doing well to boot.

  • Overzealous trading results are driving the alt-IPO crowd into a frenzy. Special purpose acquisition companies, or SPACs, were not a big deal in recent years. Now they are all that anyone can talk about, especially as a way to get around IPOs that some claim are mispricing tech debuts. Airbnb has been approached, and fintech is looking busy, and the Equity team even put together an extra episode on the matter.

  • Part of the blame comes from frothy markets, to be clear. Lemonade’s IPO pricing is making other related startups that are still private look cheap, like Hippo, and Root and MetroMile. The gap between private-market caution and public-market hype is one of the most interesting things in the market today.

  • Still no Palantir S-1. We await this like a puppy awaiting breakfast, with poorly concealed excitement.

Various and Sundry

  • In the wake of the Jamf IPO, The Exchange corresponded with fellow Apple device management shop Addigy. According to its CEO Jason Dettbarn, “the broader MDM space is growing significantly faster” than Jamf itself. Dettbarn did say that “JAMF has built a great business and unit economics,” which was kind, adding that there is “tremendous greenspace opportunities” in the MDM world. Our read? Jamf’s solid numbers (more on that in a second) belie the chance of even better results, provided that Addigy is right.

  • One more Jamf note, if we may. The Exchange chatted with Jamf CFO Jill Putman, who told us something that we’d never heard before. We asked about how Jamf priced, in light of its huge first day result. She said that IPO pricing is a balance between not leaving money on the table, and not validating more-bullish investor models for the company. Investors tend to be more optimistic than companies, she said, and if you price too aggressively you could implicitly validate those higher targets. That makes sense, and gently dampens the Twitter whining you see today about IPO mispricing.

  • Robinhood shared how it is going to improve options trading. In the light of a user suicide relating to options trading, the Robinhood UI and access to options-trading, Robinhood promised to do better. Its list — you can read it here — feels lightweight? As The Exchange has written, there is tension between Robinhood’s revenue model and its recent promise to take better care of its users regarding more exotic trades.

  • Also, Robinhood is backing out of its U.K. expansion. The company told The Exchange that its decision wasn’t tied to its revenue model. But as Robinhood makes lots of money from selling order flow in the U.S., and we understand that the model is not allowed in the U.K., we wonder about the totality of reasons behind the choice.

  • And, finally, Teespring is back from the brink and is growing like hell. The Exchange has the exclusive story early next week. Stay tuned.

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