The unrest has sparked a new debate on the best way for startups to go public, preferably one that gives VCs and startups more say in the process. The most prominent initiative is being led by Benchmark Capital's Bill Gurley who is calling forbased on software-enabled pricing that essentially eliminates the role of underwriters.
Rather than mending some of these flaws however, financial regulators are contemplating rule changes that Diamond and others warn will exacerbate the problem. And because the direct listings that VC investors are enamored with have their own sets of drawbacks, some of these critics worry that the road to public markets is only going to get bumpier.
Startups had the option of providing only two years of audited financials, instead of three which was the requirement before the JOBS Act passed, for example. The law did away with a rule requiring businesses with more than 500 shareholders to publicly disclose financial information — a rule that Lise Buyer, the founder of IPO consulting firm Class V Group, said companies often used as the "catalyst" to go public.
"There are 800 unicorns out there and they are all trying to get to a door that is either shut or almost shut" For Diamond, of Santa Clara University, it was this ability to withhold important information that enabled a startup like WeWork to swell in value in the private markets.
You have the so-called unicorn companies who never made a profit getting IPOs like Halloween candies.
Or that these companies are just pure crap fueled by Ponzi schemes and huge egos.
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