Bill Gurley says IPOs put Silicon Valley on 'bad end of a bad joke for about four decades'
and Jefferies continue to underprice IPOs, meaning companies are giving away upside to new investors. Based on Ritter's data, he estimates that Silicon Valley companies have handed over more than $170 billion as a result of underpricing."If you choose to go with the top underwriter, you get the worst execution," Gurley said. "So something's not right. There's a market inefficiency afoot."many of the problems with IPOs.
Still, neither Spotify nor Slack have been good bets thus far for public market investors. Slack has dropped about 20% in the last eight days, falling below its debut reference price of $26. Spotify opened at around $150 and is currently trading below $132. Appearing alongside Gurley on CNBC on Tuesday, Altimeter Capital's Brad Gerstner said the broader market will soon recognize the underlying issues with the IPO process.
"One thing I'm certain is the spotlight Bill is shining on this is going to close the gap," Gerstner said. "The days of handing low-priced securities, diluting the company to a bunch of long-only shops in Boston and New York, I think those days are over."
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