Comments on: Is the era of the public company coming to an end? http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/ A slice of lime in the soda Sat, 18 May 2013 23:43:55 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: dWj http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23522 dWj Wed, 26 Jan 2011 16:10:16 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23522 I assume, Dollared, that you don't believe you've actually provided much evidence for the position that it had "exactly zero effect". I obviously would expect Sarbox neither to destroy American capitalism nor to trigger an explosion in growth and investment, but it does seem reasonable to me that it would dampen the alacrity with which management of private companies would seek to be publicly listed. I assume, Dollared, that you don’t believe you’ve actually provided much evidence for the position that it had “exactly zero effect”. I obviously would expect Sarbox neither to destroy American capitalism nor to trigger an explosion in growth and investment, but it does seem reasonable to me that it would dampen the alacrity with which management of private companies would seek to be publicly listed.

]]> By: Dollared http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23504 Dollared Wed, 26 Jan 2011 00:39:54 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23504 This is the end of the ownership society. I've been asking since 2005 - what is the difference between a private equity fund with $300B in assets, and the US Steel Trust c.1890? Nothing - it's just a repeat of the concentration of wealth that occurs in an unregulated capitalistic society. This is the end of the ownership society. I’ve been asking since 2005 – what is the difference between a private equity fund with $300B in assets, and the US Steel Trust c.1890?

Nothing – it’s just a repeat of the concentration of wealth that occurs in an unregulated capitalistic society.

]]> By: Dollared http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23503 Dollared Wed, 26 Jan 2011 00:37:20 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23503 DwJ - Sarbox had exactly zero effect. Remember, there were public stock markets back when CEOs could be sued for being liars and looters, such as in the ancient 1980s. All Sarbox did was moderately increase the documentation costs - it didn't slow down the looting or expose management to the rule of law.. DwJ – Sarbox had exactly zero effect. Remember, there were public stock markets back when CEOs could be sued for being liars and looters, such as in the ancient 1980s. All Sarbox did was moderately increase the documentation costs – it didn’t slow down the looting or expose management to the rule of law..

]]> By: willid3 http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23499 willid3 Tue, 25 Jan 2011 21:17:17 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23499 how will this private market be better. they can decide what they tell their 'investors'. how is this really better? after all the company doesn't to tell you that they are broke. or that the companies is failing badly. though there are some rules that require disclosure once a company has more than 500 investors, even if they aren't on a public market. but the company can manage to keep the number of investors (suckers maybe?) under 500. how will this private market be better. they can decide what they tell their ‘investors’. how is this really better? after all the company doesn’t to tell you that they are broke. or that the companies is failing badly. though there are some rules that require disclosure once a company has more than 500 investors, even if they aren’t on a public market. but the company can manage to keep the number of investors (suckers maybe?) under 500.

]]> By: dWj http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23497 dWj Tue, 25 Jan 2011 19:15:23 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23497 How much of this is due to Sarbox? To what extent would IPOs have come back after the 2000 recession in a way that they didn't this time? How much of this is due to Sarbox? To what extent would IPOs have come back after the 2000 recession in a way that they didn’t this time?

]]> By: Derrida http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23495 Derrida Tue, 25 Jan 2011 18:17:16 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23495 I think it's a bit more complicated than Felix is letting on. For prestige companies with deep bases of investor interest and executives disinclined to be asked by scads of investors why their stock traded up or down on a given day, or whether earnings will be up or down a penny vs guidance, staying out of the public markets makes a lot of sense. Zuckerberg et al probably spend a quarter of the time on IR that a public comp does, and they don't have to convince investors on a daily basis not to sell down their stock. If you've ever been on the comp side of this, it is positively Sisyphean. However, if you are a development stage biotech or a company in some sort of tech infrastructure business (Rackspace and the like), there are no DSTs willing to put up $100M at a pop. Biotech (like CLRT, prior to its recent announcement) will instead try and muddle along, doing convertible PIPES and the like to fund ops and putting up with public company rigmarole, because there's no other game in town. I think it’s a bit more complicated than Felix is letting on. For prestige companies with deep bases of investor interest and executives disinclined to be asked by scads of investors why their stock traded up or down on a given day, or whether earnings will be up or down a penny vs guidance, staying out of the public markets makes a lot of sense. Zuckerberg et al probably spend a quarter of the time on IR that a public comp does, and they don’t have to convince investors on a daily basis not to sell down their stock. If you’ve ever been on the comp side of this, it is positively Sisyphean. However, if you are a development stage biotech or a company in some sort of tech infrastructure business (Rackspace and the like), there are no DSTs willing to put up $100M at a pop. Biotech (like CLRT, prior to its recent announcement) will instead try and muddle along, doing convertible PIPES and the like to fund ops and putting up with public company rigmarole, because there’s no other game in town.

]]> By: SGKingsley http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23491 SGKingsley Tue, 25 Jan 2011 16:51:16 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23491 "If management would manage to pay dividends and increase tangible book value, investors would return." They can't do that while dividends are exposed to double taxation. That's why most take the alternative of stock buyback nowadays, so that investors can defer capital gains. “If management would manage to pay dividends and increase tangible book value, investors would return.”

They can’t do that while dividends are exposed to double taxation. That’s why most take the alternative of stock buyback nowadays, so that investors can defer capital gains.

]]> By: walt9316 http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23488 walt9316 Tue, 25 Jan 2011 16:13:49 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23488 But isn't it those VCs and angels who push for IPOs? But isn’t it those VCs and angels who push for IPOs?

]]> By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23487 y2kurtus Tue, 25 Jan 2011 16:06:05 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23487 Publicly traded companies offer advantages that private exchanges will never match. By far the largest advantage is they provide the richest valuation to the seller. Facebook is a statistical outlier in this reguard for the reasons Felix has previouly mentioned. Private equity valuation metrics depend on the industry but deals most commonly get done in the ballpark of 5-7x normalized earnings. Public markets usually trade around 10-15x normalized earnings. When the seller is a wealthy family more concerned with control and privacy than making their 2nd billion then they might favor private placements. Everyone else is going to push for public trading and the increased liquidity and valuation that IPO's bring. Publicly traded companies offer advantages that private exchanges will never match.

By far the largest advantage is they provide the richest valuation to the seller. Facebook is a statistical outlier in this reguard for the reasons Felix has previouly mentioned. Private equity valuation metrics depend on the industry but deals most commonly get done in the ballpark of 5-7x normalized earnings.

Public markets usually trade around 10-15x normalized earnings. When the seller is a wealthy family more concerned with control and privacy than making their 2nd billion then they might favor private placements. Everyone else is going to push for public trading and the increased liquidity and valuation that IPO’s bring.

]]> By: ARJTurgot2 http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23486 ARJTurgot2 Tue, 25 Jan 2011 15:23:55 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23486 At an internal P/E of 100, I truly hope that the rich continue to buy up such companies before they reach the public market. Better, Goldman should buy ALL of Facebook and hold it. They can distribute the stock in lieu of cash for bonuses. At an internal P/E of 100, I truly hope that the rich continue to buy up such companies before they reach the public market. Better, Goldman should buy ALL of Facebook and hold it. They can distribute the stock in lieu of cash for bonuses.

]]> By: RichardR1 http://blogs.reuters.com/felix-salmon/2011/01/25/is-the-era-of-the-public-company-coming-to-an-end/comment-page-1/#comment-23485 RichardR1 Tue, 25 Jan 2011 14:55:53 +0000 http://blogs.reuters.com/felix-salmon/?p=7076#comment-23485 Public!? Public companies are now largely managed for the benefit of the executives, fund managers, bankers and such. It is said that to own a minority position of a closely held company is to own nothing; this has certainly been extended to public companies. As an investor I know that management will manipulate the business and the books to maximize their personal return. And they will work with the fund managers, the accountants, the lawyers, and the rest of the insiders to keep published earnings at a figure that allows the stock to stay at a level at which they can all maximize their personal incomes. Much of this money should belong to shareholders. If management would manage to pay dividends and increase tangible book value, investors would return. Maybe there could even be a second stock market for real public companies. Of course then the executives would only be rich and not super rich. Sounds like class warfare. Public!? Public companies are now largely managed for the benefit of the executives, fund managers, bankers and such. It is said that to own a minority position of a closely held company is to own nothing; this has certainly been extended to public companies.

As an investor I know that management will manipulate the business and the books to maximize their personal return. And they will work with the fund managers, the accountants, the lawyers, and the rest of the insiders to keep published earnings at a figure that allows the stock to stay at a level at which they can all maximize their personal incomes.

Much of this money should belong to shareholders. If management would manage to pay dividends and increase tangible book value, investors would return. Maybe there could even be a second stock market for real public companies. Of course then the executives would only be rich and not super rich. Sounds like class warfare.

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