The Seller’s Curse and IPO Pricing

Benchmark Capital partner and legendary tech investor Bill Gurley recently declared on CNBC, “It took me two decades to figure this out, but I think Silicon Valley’s been on the bad end of a bad joke for about four decades now, in terms of the way the traditional IPO process works.” He and others believe that direct listings, like the ones recently completed by Spotify and Slack, are friendlier to issuers.

The core of Gurley’s concern is that the traditional IPO process yields unfavorable pricing outcomes for issuers. On average since 1980, the stock price of IPO firms has popped … Read more

Why Employers Make Bad Choice Architects

Federal retirement policy has long been premised on the view that many of us, if left to our own devices, will save too little for retirement. A growing literature in behavioral economics has shown that seemingly small nudges in employer retirement plan design, like automatically enrolling workers into contributing to the plan, can have large effects on behavior. Many have seized on these findings to advocate that employers design the “choice architecture” of their 401(k) plans in order to improve their workers’ choices.

Indeed, this approach is widely heralded as the most successful application of behavioral economics to public policy … Read more