Steve Maletzky: I'll touch on a few key areas where the markets are converging.
The most clear representation of the convergence that we're talking about is the pre-IPO crossover financing. The robust appetite for high-growth investments—especially in this low interest rate environment—and particular appetite for IPOs, is driving mutual funds and hedge funds that typically focus on public investments into the private market to establish positions in companies well before they are set to go public. And this dynamic has created a bridge to the public markets for these earlier stage companies that have historically not been viewed as necessarily IPO ready, not in all cases, but in many cases.
SPACs, or special purpose acquisition corps, have evolved from what was the option of last resort to become a very viable path for companies to go public. A SPAC is an entity that goes public with no business operations. It's just an IPO that raises capital with the sole purpose of making an acquisition over a two-year time horizon. And so private companies can utilize SPACs as a way to be acquired and go public in that manner.
Another very hot topic in our world right now is direct listings. Direct listings are gaining a ton of momentum even though they're still only available to a subset of special situations. But a direct listing is where a company lists its own shares on a global exchange without the issuance of new shares or primary shares and without the use of an underwriter.
And while this auction mechanism has become very attractive, what is now another strategy that's available to really almost any company is what's called the modified auction style IPO. This is a strategy that is driven by the view that pre-IPO investors have that the traditional IPO process is skewed too heavily in favor of the public investor market and that most IPOs are underpriced.
In a traditional IPO process many investors will have a view on price, but many will also just submit what's called a market order and not provide any clarity on price. In a modified auction style IPO, every order that an investor puts in must be accompanied with the price at which they are willing to pay.
And this is how we can really create a much more fair and visible demand curve and efficient pricing and valuation discovery for issuers during the IPO process. And so these are just some of the novel strategies that have been explored and executed upon over the last 12 months in our world, and we do expect this convergence of public and private markets to continue.