Comments on: How the IPO market is broken http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/ 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: Danny_Black http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37241 Fri, 23 Mar 2012 09:32:04 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37241 How are any of the latest big tech companies IPO-ing “breakthrough” companies? Exactly what difference is LinkedIn, Zynga and Groupon bringing to the business world? Or Facebook?

VCs are pushing for “companies to grow at all costs” because that is what is going to give them a story to cash out – either by finding a greater fool privately or publicly.

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By: realist50 http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37222 Thu, 22 Mar 2012 17:30:38 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37222 Rich and Steve – the appropriate numerator to compare the S&P 500 vs. U.S. GDP is not all the revenue of S&P 500 companies, but rather domestic payroll spending plus domestic operating profit (EBITDA). This number is, admittedly, difficult to impossible to find from public filings. The total revenue of companies in an economy can exceed GDP, potentially by a large margin, because of resale of products from 1 company to another. I think of it in terms of a retail supply chain – if a manufacturer makes a product and sells it to a retailer, the GDP generated is the end selling price of the product, not the total revenue for both the retailer and the manufacturer.

As an aside, this relationship (or lack thereof) is why I’m always annoyed when a commentator notes Wal-Mart’s revenue as a percent of GDP. It’s apples and oranges – Wal-Mart’s contribution to GDP is dramatically less than its revenue.

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By: SteveHamlin http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37210 Thu, 22 Mar 2012 14:53:44 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37210 @richclayton: The S&P500 had revenues of about $10.8 trillion in 2011. U.S. GDP is around $15 trillion, so S&P500 revenue is about 70-75% of U.S. GDP.

Source: http://www.zacks.com/commentary/19494/ (had to divide total net income by total net margin to estimate total revenue)

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By: richclayton http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37207 Thu, 22 Mar 2012 13:39:26 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37207 The graph is apparently showing the market capitalization of the S&P500 against GDP, which frankly is not much of an indicator of anything. I suspect that what you would like to see is Total Revenue (or even total US Revenue) for the S&P500 vs. GDP. I’m pretty sure at the moment that would be about 50%, but I could look it up.

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By: JustinCormack http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37206 Thu, 22 Mar 2012 13:37:57 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37206 The falling capital requirements for most businesses are not going to go away, so capital requirements in most cases will stay small. The VCs who get this are going for even smaller and earlier funding (eg YCombinator), so public markets are just not going to be required. The ultra high growth companies are just there to provide something to spend the money the VC industry has on, you are right they have to push this model. What is less clear is that this is a problem at all, public equity markets can just go into long term decline. If individuals want to participate in economic growth they might have to start up a business!

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By: johnhhaskell http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37196 Thu, 22 Mar 2012 07:45:19 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37196 sorry ROA

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By: johnhhaskell http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37195 Thu, 22 Mar 2012 07:44:41 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37195 laguardia23, welcome to the capital markets! When was the last time a company IPO’d when it had $80 billion in revenue (seriously?! WTF) and 300 billion in total assets (WTF squared). If that company had a 5% net margin its ROE would be a pathetic 1.25%, awesome. Do you waste much time reading balance sheets?

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By: laguardia23 http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37183 Thu, 22 Mar 2012 03:22:54 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37183 IPOs are not broken, they’re fixed. A billion dollars for Facebook and Mark Z for example and he thinks he has the bragging rights to IPO himself and his company. I’d respect the IPO of a firm who has 80 billion in revenue and another 300 bil in total assets.

It’s always some venture cap mooch being disorderly and cutting in line.

I second BrPH’s emotion completely.

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By: EpicureanDeal http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37182 Thu, 22 Mar 2012 01:58:59 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37182 http://epicureandealmaker.blogspot.com/2 012/03/size-matters.html

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By: BrPH http://blogs.reuters.com/felix-salmon/2012/03/21/how-the-ipo-market-is-broken/comment-page-1/#comment-37180 Thu, 22 Mar 2012 01:32:51 +0000 http://blogs.reuters.com/felix-salmon/?p=12561#comment-37180 “when you take the world-changing companies, the ones that come up with radically new products and create new markets or disrupt existing ones, almost all are venture-backed”

A list please. And define what you mean by venture-backed. Because if you mean the professional firms, I don’t think that’s true at all.

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