Comments on: The SEC comes round to private markets http://blogs.reuters.com/felix-salmon/2011/04/08/the-sec-comes-round-to-private-markets/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: EllieK http://blogs.reuters.com/felix-salmon/2011/04/08/the-sec-comes-round-to-private-markets/comment-page-1/#comment-25695 Sat, 09 Apr 2011 13:51:46 +0000 http://blogs.reuters.com/felix-salmon/?p=7881#comment-25695 Seriously, Felix, how can you say that
“there’s a strong case to be made that US companies can be more competitive internationally if they’re free to concentrate on running themselves as best they can, and don’t need to use up precious management cycles dealing with analysts and journalists and people second-guessing all of their actions on the basis of how their share price is moving that day.”

There is a reason that listing on U.S. stock exchanges is so highly sought after. And shares of U.S. companies (as well as German and U.K and no doubt others) are desirable for investors. That reason is “disclosure requirements” and GAAP (or international GAAP for Germany UK others). If U.S. companies didn’t have disclosure requirements, they would also be a lot less attractive to international investors!

Private stock, restricted stock, whatever, is not appropriate for everyone. It is particularly inappropriate as an investment for those who don’t have access, or time, to do the sort of research necessary to estimate valuation with a pro-forma. Most non-institutional investors have their hands full with investing and following exchange traded equities.

I have an account with SharesPost, have had one for over a year. SharesPost has very explicit disclaimers and warnings about lack of transparency and liquidity. I think well of SharesPost, I am not disagreeing with your assessment of them, as they offer a service, along with disclaimers that any analysis or research reporting provided is based on limited information about these private companies. This is not investing for the general public, and SharesPost makes that very clear.

I think that spiffy76 (the previous comment) is right on the mark in his assessment.

Trying to turn private markets into “semi-public” ones, as spiffy76 said, subverts the whole concept of SEC disclosure requirements, and will result in an even less equitable IPO market. Right now it isn’t great, but at least we know how it works.

One other thing. I’ve been wondering about this for awhile, would be appreciative if anyone addressed: Why DOES Facebook want to do a semi-private IPO, or any sort of IPO at all now? Why would they want to give up any amount of ownership in this company? It is hard for me to believe that they lack for funds so much that they would want to sell equity.

As a private company, Facebook isn’t burdened by disclosure, public scrutiny, shareholder accountability. That is the benefit of their status as a privately held concern. Why change now?

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By: spiffy76 http://blogs.reuters.com/felix-salmon/2011/04/08/the-sec-comes-round-to-private-markets/comment-page-1/#comment-25693 Sat, 09 Apr 2011 02:02:32 +0000 http://blogs.reuters.com/felix-salmon/?p=7881#comment-25693 I’m not very sophisticated financially, but my guess is that the goal is to provide a mechanism for up-pricing IPOs in a weak IPO market. Usually, going public works out very nicely for the insiders and the underwriters and their inside clients, sticking the eager public with whatever profits remain to be made. Right now, the public is risk averse.

My guess is that going “semi-public” will allow a laundering period with minimal reporting requirements, but lots of fancy names, to establish the company as a hot property for the eventual IPO. It might work.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2011/04/08/the-sec-comes-round-to-private-markets/comment-page-1/#comment-25684 Fri, 08 Apr 2011 17:40:56 +0000 http://blogs.reuters.com/felix-salmon/?p=7881#comment-25684 so how many privately held companies are being impacted by the 500-shareholder rule? There’s AOL II, I mean Facebook, there’s MinutiaeAlerts, I mean twitter, and then Web Trading Stamps, I mean Groupon. Those are the ones that are always given as examples of privately held companies not going public. How many other startups are profitable enough to go public, yet their VC investors have stopped IPOs because they want to let their winnings ride? Should this really be a high priority for the SEC?

VCs invest in startups because they want a liquidity event in a relatively short time. Private markets like SecondMarket will not provide enough liquidity for VCs to unload their shares. Most startups will go public when they have the opportunity, or be acquired. The dearth of IPOs is more due to a shortage of new companies than anything else. Let the SEC spend more time policing things like ponzi schemes and speed trading.

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