Open Price-and-Time Listing
Let open supply, demand, price, and order time determine a stock’s first trade
- Difficulty
- Expert
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 97%
A direct listing uses the exchange’s existing opening-auction infrastructure rather than asking bankers to select investors and manually set the offer price. The company first distributes detailed information, potentially through a public investor day and an optional road show. Investors then submit orders through connected brokerages. The exchange announces an indicative range while participants tighten bids and offers. Once supply and demand match, an opening block trade establishes the price. Orders above the opening price qualify, while orders at that price are prioritized by submission time. Because allocation depends on price and time rather than institutional status or relationships, the mechanism expands access and reduces discretionary underpricing. Its defining advantage is not novelty but reuse of systems that already open publicly traded stocks every day.
Origin
Bill Gurley presented direct listings as an established exchange process that offers an open alternative to manually priced and allocated IPOs. Extracted from Masters in Business.
Core principles
- 01Open participation produces fairer price discovery
- 02Use established exchange infrastructure instead of bespoke allocation systems
- 03Allocate shares by price and order time rather than investor identity
- 04Give retail and institutional investors equal access to information and orders
How to run it
- 1
Prepare Public Information
Provide investors with detailed, broadly accessible information about the company. Use a public investor day to give every participant a substantial analytical foundation.
Pro tip Publish presentations and supporting material so retail investors receive the same core information as institutions.
Watch out Information asymmetry undermines the open-access objective.
- 2
Use Existing Exchange Rails
Register the listing through the exchange infrastructure already used to open stocks. Avoid creating a bespoke auction system unless existing systems genuinely cannot support the transaction.
Pro tip Treat operational familiarity as an advantage because brokers and market makers already understand the process.
Watch out Custom infrastructure introduces unnecessary access barriers and execution risk.
- 3
Open Participation
Allow investors to submit orders through connected retail and institutional brokerages. Do not create a private invitation list for potential shareholders.
Pro tip Verify that small orders can participate under the same price rules as large orders.
Watch out Nominal openness is insufficient if only specialist accounts can submit bids.
- 4
Gather Blind Orders
Collect bids and offers without awarding shares according to an investor’s brand or relationship with an intermediary. Let each participant state price and quantity.
Pro tip Separate price discovery from investor identity wherever possible.
Watch out Discretionary allocation recreates the central weakness of a traditional IPO.
- 5
Tighten the Range
Publish indicative ranges as orders accumulate and allow participants to revise their bids and offers. Continue until executable supply and demand converge.
Pro tip Use repeated indications to help participants react to aggregate market information.
Watch out Do not force an opening before the order book supports a credible clearing price.
- 6
Execute by Price and Time
Establish the opening price through the matched block trade. Fill orders above that price and prioritize orders at the clearing price by when they were placed.
Pro tip Document the allocation rule before accepting orders.
Watch out Changing priority after orders arrive destroys confidence in the process.
In the wild
Gurley observed Asana’s direct listing as an investor. The exchange announced a range, investors tightened bids and offers, and a block trade established the opening. Allocation was tied to price and time rather than the investor’s identity or brand.
→ Asana completed a successful listing despite not being a household consumer brand.
A retail investor enters an order for one share through a connected brokerage before the opening. If the bid exceeds the eventual opening price, the order participates under the same price rule used for larger investors rather than requiring a private allocation.
→ The investor gains rules-based access to the opening transaction.
Common mistakes
Hand-Setting the Price
Selecting a price without using open supply and demand makes systematic mispricing more likely.
Restricting Eligible Investors
Limiting bids to a favored institutional circle prevents broad participation and introduces relationship-based allocation.
Building an Unnecessary Auction System
A bespoke platform can add cost, unfamiliar rules, and brokerage barriers when exchanges already possess suitable opening-auction technology.
Is it for you?
Best for
It is best for companies seeking broad investor access and market-based opening-price formation when going public.
Not ideal for
It is not ideal for issuers unwilling to accept transparent demand-driven pricing or complete public information access.
From the transcript
“And it's all just a simple matter of matching supplying demand.”
“But it's completely blind, so no one gets an allocation because of who they are there, their brand, and it's all tied to that algorithm…”
“it uses the systems that are already in place.”
From the episode
Bill Gurley on Entrepreneurs and Technology (Podcast)
Bill Gurley