Comments on: Why going public sucks: it’s not governance issues

By: retheauditors

retheauditors — Thu, 19 Jul 2012 05:12:32 +0000

I heard Andreessen speak at the Stanford Directors’ College a few weeks ago. In addition to the type of rhetoric you describe he also said that if there was a way to get his money out of startups without going public he’l do it and if he has to go public he’ll only do it going forward the “controlled company” exemption the very specific exemption to exchange rules on corporate governance rules that gave Mark Zuckerberg all the power one his company and his board. Basically the board at Facebook serves at his pleasure.

Reed Hastings, a Facebook board member, said at the same event that he was still trying to decide of that made sense for him, given his philosophy that a board’s most important job was to hire and fire the CEO. If a board member can not take a position adverse to the CEO without the risk of being removed, what’s the point?

I’ve decided Andreessen is good for Andreessen but not so much for the rest of the capital markets.

By: BrPH

BrPH — Tue, 17 Jul 2012 21:48:21 +0000

I’m not surprised at Andreesen’s attitude. He’s a programmer who lucked into being in the right place at the right time. The ocean fell on his head and he got rich. After that, like most rich people, he confuses that with competence in everything. So he doesn’t think he needs to learn, check his ideas against facts, etc.

This crap is pandemic in the silicon valley. I had a conversation with the head of CNET recently that was classic. I gave him that study that showed the payoff is not 2-5 years as he was saying, but 8-15. But he knows his market so he continues to shovel the horsemanure that his demographic wants to hear. He wouldn’t respond after I pointed out that Facebook was an 8 year investment.

Because they have money, nobody corrects them. Good for you for stomping on Andreesen’s ignorance.

By: dorfl68

dorfl68 — Tue, 17 Jul 2012 20:40:59 +0000

I would argue that
(1) CEOs spend way to much time with journalists and analysts, what matters are investors
(2) CEOs should have the guts not to look at the share price every day, but at value creation over longer timefarames
(3) today’s share price is completely irrelevant for real decisions, which should be based on fundamental principles like, say, NPV
(3) if you do these things, you will have a better company – and more value creation- than if you appear on TV all the time.

By: hypermark

hypermark — Tue, 17 Jul 2012 20:31:38 +0000

When you say that CEOs have very little control over their company’s share price, that’s only true on a short-term horizon. Manage the business, take the long view, be transparent on the measuring sticks, and your price will reflect it.

Apple is Exhibit A to this point. It took a good five years for their price to permanently turn the corner. Short-termers would have logically concluded that Jobs needed to do something to prop the stock.

Instead, he executed, innovated and executed some more, and the rest took care of itself.

Amazon is another example where the willingness of the CEO to not succumb to the short-term vagaries of investors worked out swimmingly for the stock.

Perhaps more troubling is that in neither of these cases is strong board governance a defining attribute.

By: Frwip

Frwip — Tue, 17 Jul 2012 20:10:20 +0000

” Zuckerberg — or any other CEO — has very little control over his company’s share price, but once a company is public, that’s all the public really cares about. ”

It depends on which section of the public you are talking about. For some, pension funds, sovereign funds, long term individual investors, reliable dividends and perennity of the business are what matters.

That could (and should) become the majority of stock owners if the strong institutional biases towards stock appreciation were corrected, in particular tax distortions that strongly favor capital gains against income and strong executive biasing through stock options and similar incentives.

It may also be a matter of the companies selling themselves to the right investors, if their boards think it’s such a problem (an opinion I dont’ think Zuckerberg would share).

By: idaman

idaman — Tue, 17 Jul 2012 19:32:25 +0000

Andreessen is conflicted because venture capital investments only have a two exit strategies, buyouts and IPOs. The latter is a much easier exit for companies that have user growth but not much else of value (in other words, bombs). Just sell it to the public. In many cases there is not enough liquidity to exit on the IPO, so disclosures of any kind are a problem for the Groupons of the world.

It’s also funny he uses Enron as an example. How many tech IPOs in 1999 were absolute jokes? Too many to count. And there were lawsuits galore clawing back cash from the investments banks. I think venture capital firms were just as culpable. Let’s change the law!