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Having worked at several public companies, one of the biggest reasons companies don't go public... is the incredible workload and productivity loss of being a p

Having worked at several public companies, one of the biggest reasons companies don't go public... is the incredible workload and productivity loss of being a public company. Audits by the Big 4 accounting firms, Quarterly Filings, constant revenue and EPS projections. With the rise of private equity funds, there has been a legitimate alternative to going public. PE certainly has its own bevy of issues, but I'm not sure it's not worthwhile...

3pt14159 8y ago
Sometimes you have no choice. There are limits on shareholder counts for private corporations in some countries, including the US. But I agree with you, it's a real problem.
- adventured 8y ago
  That's not correct re the US. You don't have to IPO or list your company (eg on the NYSE) publicly due to shareholder count. You can remain private, you have to publish financials publicly (above 1,999 shareholders). https://www.investopedia.com/terms/5/500-shareholder-threshold.asp https://www.investopedia.com/terms/5/500-shareholder-thresho...
  - hn_throwaway_99 8y ago
    Yeah, but at that point you incur many of the costs with little of the benefit, so it works like a de facto push to IPO. Is anyone aware of any companies that have stayed in that "over shareholder threshold but still remained private" boat for any considerable length of time (i.e. greater than a year or 2)?
    - vonmoltke 8y ago
      Publix Supermarkets comes immediately to mind. There are others, if you dig through the Fortune 500. The requirements for such companies are nowhere near as onerous as those required of public companies. They need to file a 10-K and 10-Qs (as necessary), but most other filings are not required. They are also not subject to Sarbanes-Oxley or Dodd-Frank.
      - toomuchtodo 8y ago
        It should be noted that Publix is one of the largest employee owned companies in the US. Employees own 31% of the firm through an employee share-ownership plan. (The rest of Publix, established in 1930 by George W. Jenkins, is largely owned by the Jenkins family, which still runs the firm.)
digi_owl 8y ago
Dell took the namesake company private some years back because he felt that being public didn't allow the company to make long term plans.
- nsx147 8y ago
  Bezos doesn’t seem to have that problem.
  - tonyedgecombe 8y ago
    I think you could argue that Bezos is an outlier and not representative of the majority.
  - mrep 8y ago
    Amazon is pumping out 40% YOY growth rates which Dell is not. Long term ain't so long term when your company doubles in size every 2 years.
    - mcguire 8y ago
      To have a more traditional valuation, Amazon would have to have a GDP roughly the size of Russia (https://news.ycombinator.com/item?id=17691875 https://news.ycombinator.com/item?id=17691875), (https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29?wprov=sfla1 https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_%28...)
      - adventured 8y ago
        No it wouldn't. Amazon's operating income is up to an annualized $10 billion now. Their profitability has exploded higher in the last three years (thanks heavily to AWS), drastically out of ratio with their sales growth. Another three years from now, their operating income will very likely be up to $20-$25 billion (I'm using operating income here because of recent rule changes on what's included in net income). That would still be a rich multiple on today's market cap, no question. There's a massive gap between AMZN having a 40 or 60 PE ratio (ie a very rich multiple), and your claim that they'd need ~$1.5 trillion in revenue (Russia's nominal GDP for 2017) to justify their valuation. Amazon's net income margin now exceeds Walmart's and is heading higher due to the fat margins of AWS. At $400 billion in sales (five to seven years out), they'll very reasonably be able to generate $30 billion in net income (old net income calculation) on the path they're on. At $30b in net income, you're talking a ~30 PE ratio at today's market cap (ie a traditional valuation), and it requires nothing even remotely like an equivalent to Russia's GDP. Microsoft and Google both routinely sport valuations that are 30x multiples of earnings (as do dozens of large tech firms). The issue with Amazon, is that their future returns have been pulled forward, not whether they can ever justify a $900b market cap with a traditional multiple.
mojo982 8y ago
I was looking for a comment similar to this before I commented my own. Going public means you give up a ton of control and incur a recurring cost. Being public has its own costs.
- astura 8y ago
  You also totally give up privacy (and add accountability), which might be very important for some business owners to maintain.
a5seo 8y ago
Yep. The price went up a lot after Dodd Frank, too.
- yborg 8y ago
  So the loss of public companies also includes the loss of companies who were milking the market via shady accounting. There is a persistent narrative that Dodd-Frank was just some kind of punitive punishment of big capital for being too big - the reason was to give average investors better visibility into the companies in the public markets because of widespread abuses.
  - archildress 8y ago
    I can argue both sides of this. Most companies have some questionable accounting practices so yes, oversight is necessary. But the cabal of the Big 4 firms is far more dangerous than any individual company's practices. I'm just waiting for the day that the next Enron happens. Been on both sides and I promise everyone, it's a matter of time.

3pt14159 8y ago

Sometimes you have no choice. There are limits on shareholder counts for private corporations in some countries, including the US. But I agree with you, it's a real problem.

adventured 8y ago
That's not correct re the US. You don't have to IPO or list your company (eg on the NYSE) publicly due to shareholder count. You can remain private, you have to publish financials publicly (above 1,999 shareholders). https://www.investopedia.com/terms/5/500-shareholder-threshold.asp https://www.investopedia.com/terms/5/500-shareholder-thresho...
- hn_throwaway_99 8y ago
  Yeah, but at that point you incur many of the costs with little of the benefit, so it works like a de facto push to IPO. Is anyone aware of any companies that have stayed in that "over shareholder threshold but still remained private" boat for any considerable length of time (i.e. greater than a year or 2)?
  - vonmoltke 8y ago
    Publix Supermarkets comes immediately to mind. There are others, if you dig through the Fortune 500. The requirements for such companies are nowhere near as onerous as those required of public companies. They need to file a 10-K and 10-Qs (as necessary), but most other filings are not required. They are also not subject to Sarbanes-Oxley or Dodd-Frank.
    - toomuchtodo 8y ago
      It should be noted that Publix is one of the largest employee owned companies in the US. Employees own 31% of the firm through an employee share-ownership plan. (The rest of Publix, established in 1930 by George W. Jenkins, is largely owned by the Jenkins family, which still runs the firm.)

digi_owl 8y ago

Dell took the namesake company private some years back because he felt that being public didn't allow the company to make long term plans.

nsx147 8y ago
Bezos doesn’t seem to have that problem.
- tonyedgecombe 8y ago
  I think you could argue that Bezos is an outlier and not representative of the majority.
- mrep 8y ago
  Amazon is pumping out 40% YOY growth rates which Dell is not. Long term ain't so long term when your company doubles in size every 2 years.
  - mcguire 8y ago
    To have a more traditional valuation, Amazon would have to have a GDP roughly the size of Russia (https://news.ycombinator.com/item?id=17691875 https://news.ycombinator.com/item?id=17691875), (https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29?wprov=sfla1 https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_%28...)
    - adventured 8y ago
      No it wouldn't. Amazon's operating income is up to an annualized $10 billion now. Their profitability has exploded higher in the last three years (thanks heavily to AWS), drastically out of ratio with their sales growth. Another three years from now, their operating income will very likely be up to $20-$25 billion (I'm using operating income here because of recent rule changes on what's included in net income). That would still be a rich multiple on today's market cap, no question. There's a massive gap between AMZN having a 40 or 60 PE ratio (ie a very rich multiple), and your claim that they'd need ~$1.5 trillion in revenue (Russia's nominal GDP for 2017) to justify their valuation. Amazon's net income margin now exceeds Walmart's and is heading higher due to the fat margins of AWS. At $400 billion in sales (five to seven years out), they'll very reasonably be able to generate $30 billion in net income (old net income calculation) on the path they're on. At $30b in net income, you're talking a ~30 PE ratio at today's market cap (ie a traditional valuation), and it requires nothing even remotely like an equivalent to Russia's GDP. Microsoft and Google both routinely sport valuations that are 30x multiples of earnings (as do dozens of large tech firms). The issue with Amazon, is that their future returns have been pulled forward, not whether they can ever justify a $900b market cap with a traditional multiple.

mojo982 8y ago

I was looking for a comment similar to this before I commented my own. Going public means you give up a ton of control and incur a recurring cost. Being public has its own costs.

astura 8y ago
You also totally give up privacy (and add accountability), which might be very important for some business owners to maintain.

a5seo 8y ago

Yep. The price went up a lot after Dodd Frank, too.

yborg 8y ago
So the loss of public companies also includes the loss of companies who were milking the market via shady accounting. There is a persistent narrative that Dodd-Frank was just some kind of punitive punishment of big capital for being too big - the reason was to give average investors better visibility into the companies in the public markets because of widespread abuses.
- archildress 8y ago
  I can argue both sides of this. Most companies have some questionable accounting practices so yes, oversight is necessary. But the cabal of the Big 4 firms is far more dangerous than any individual company's practices. I'm just waiting for the day that the next Enron happens. Been on both sides and I promise everyone, it's a matter of time.