Downside To An IPO

from the you-no-longer-control-your-shares dept

The latest in Red Herring’s evil-behind-the-scenese-of-the-IPO story is about the downside many companies face after the IPO. These can be summed up pretty quickly as “you no longer control your own shares”. Of course, that’s exactly what it means to take a company public, but apparently some entrepreneurs forgot this when they saw all the green stuff that they, personally, were about to get. So, I find it hard to sympathize with the CEO who complains about the downsides of his IPO: the stock went on a roller coaster ride as institutional investors pumped it up, and brought it back down again leading to pissed off retail investors, nervous customers, and employees with low morale. Yes, that sucks, but that’s part of what being a public company is all about – and anyone who takes their company public should be prepared for such possibilities.

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Comments on “Downside To An IPO”

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Ed says:


Good insight, Mike. A CEO of a newly public company can’t complain about being subject to the whims of the stock market because that’s exactly what he wanted. If executives really cared about the business instead of getting rich quick, they’ve always got the option of not going public, as odd as that must have seemed last year.

Duffman says:

Private companies

This reminded me of an an old article I read about a millionaire scientist who owned his own company that did nothing but research a cure for cancer. He never took it public and had no reason to, because he felt that if he had, the company that he had formed for his own (unselfish) purposes would be forced to do something more profitable and put his project on the back burner. This was years ago, though, long before everyone and their dog had an IPO. I thought it was kind of noble of him – you don’t hear about that kind of hero often.

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