A fully automated IPO process is not on the immediate horizon, but technology isn’t the barrier, institutional adoption is.
- IPO Price: Venture Firms know their cost basis, where comps were priced, company positioning, where the equity markets sit, all of which become inputs into the valuation model. The difficult part to replace with automation is the “company positioning” piece. If you are an Insurance company trying to position yourself to the Street as a Software company, well, that is more art than science. AI agents for prospective buyers may submit indications of interest / price levels via a blockchain network whether it’s an IPO process led by an intermediary (I-Banks will need to invest in AI or be left in the dust), or a direct listing. Sellers’ AI agents can make “go” “no-go” recommendations based on interest levels. These processes will occur in real-time.
- Due Diligence: I’m not sure what type of due diligence investors are doing these days, just look at the equity markets – the Tech sector in particular. I can easily imagine human Portfolio Managers and Analysts being replaced by AI agents over the next 25 years to where humans will be few and far between. This automation already started en masse in the early 2000’s with the rise of Quant funds. In the future, AI agents will ingest machine readable information including financial statements, market news, technical signals (micro and macro), geopolitical risk, company-specific risk factors and general market sentiment in anticipation of where the equity market is going and how the IPO opportunity may fit into a larger portfolio strategy (think of what Renaissance Technologies does today).
- Road Show: Road shows will become obsolete as AI agents representing Asset Managers assess the digital information mentioned above. In the future, these data sets will be accessed via blockchain networks rather than data terminals or emails containing Word docs, PDFs and Excel spreadsheets. I am not aware of any FinTech/ Information services companies that have invested heavily in blockchain networks for this purpose. I am only aware of the trade execution function having moved to blockchain networks on a small scale some years ago.
- Trading: Pre-trade compliance, trade execution, etc. are all easy to fully automate. Trades will happen in real time once legacy exchanges and dark pools evolve into blockchain networks. We will see widespread tokenization of equity shares as blockchain adoption inevitably happens.
Related TEKday article: How AI Will Conquer Financial Services