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I think that's what the grandparent commenter meant. Early startups with large growth opportunity used to be abundant on the stock market. But now the burden is

by tfha 8y ago

I think that's what the grandparent commenter meant. Early startups with large growth opportunity used to be abundant on the stock market. But now the burden is too great, so only larger companies can IPO. I even hear phases like "dump it on the public market" - the public market is where you go today after you have milked most of the major opportunity out already.

dstroot 8y ago
This. The public mkt used be the source of capital for companies like Facebook. Now it’s all private until most of the growth juice is squeezed out and now the public mkt is a liquidity event for the private investors. If/when they want to...
- ricardonunez 8y ago
  Isn't that because there a more wealthy individuals and many of them are connected to the same network?
- chiefalchemist 8y ago
  Just the same, pub mrkts used to be about companies and investing. Now they're just datasets to be milked and manipulated by quants, automated trading, etc. Perhaps the better conclusion of the NYT article should have been that these markets no longer carry the economic significance they once did?
- nugget 8y ago
  Facebook is up almost 500% from its IPO price, so even the very smart private equity and venture folks can misjudge when an opportunity has been completely milked.
  - mattnewton 8y ago
    You’re in agreement with gp- he’s saying that an IPO used to be an opportunity like facebook, but now they just stay private like Uber until they believe most of the value is locked in.
  - ataturk 8y ago
    True, but we're talking overall trends here, not just one FANG stock. Overall, private equity and big institutions have learned that they can fund companies and receive all the gains without ever dealing with the SEC or the general public. It's definitely a part of the story about the "rich getting richer." I'm a multi-millionaire right now, but I don't hold a candle to the wealth of even the CEO of the company I work for and I definitely don't hold a candle to the billionaires we love to talk about. My entire net worth is a rounding error for them! That is how insane the wealth imbalance has become and I say this as a "wealthy" libertarian-minded person. Reagan's trickle down was a lie. And while wealth is not a zero-sum game, it is certainly true that some wealthy people have a lock on wealth creation via their connections and their power position, which is something aspirant individuals such as myself will never have access to.
  - scottlu2 8y ago
    Another reason to go public is because the SEC forces companies with 2000 stock owners (used to be 500 pre-2012) to file public disclosure documents similar to being public, so companies typically go public at that point. I’ve heard that some work around this limit by issuing IOUs indexed to the stock price. https://www.investopedia.com/terms/5/500-shareholder-threshold.asp https://www.investopedia.com/terms/5/500-shareholder-thresho...
    - woolvalley 8y ago
      You also can give RSUs, which don't actually become owned by the recipient until the company is acquired or become public. No fancy IOUs required. This IOU is denominated in stock units instead of a cash price.
curun1r 8y ago
OTOH, a lot of companies used to go public that had no business doing so. We went through a period where a lot of normal folks lost big portions of their retirement savings betting on public companies that really shouldn't have been in public markets. Yes, early-stage startups have the potential to return 100x, but they've also got the potential to lose 100%. That's the reason why we have the rules around qualified investors...they're people who are supposed to be in a position where losing their entire investment doesn't cause the kind of impact we were seeing when so many dotcom IPOs failed.
- chrisco255 8y ago
  Yes, so punish the 98% who invest responsibly because 2% go ape? I know plenty of people who lost their shirts investing in real estate in the 00's because supposedly that's a "safe" investment that retail investors can be trusted with since there's so many checks and balances. Gimme a break. All investments are risky. Public companies can go bankrupt. Real estate markets can crash. Shit hits the fan. People are either adults and take responsibility for their financial decisions or they're not. The legal distinction between who can buy what assets based on net worth is absolutely ridiculous.
  - cft 8y ago
    Nanny state is killing public markets with regulation. The regulatory burden goes only one way- up and up. Only the largest established companies are semi-comfortable with this regime: it sets a barrier to entry. After all, they helped to lobby these regulations. That's all.
  - eanzenberg 8y ago
    Woah woah are you recommending personal responsibility here? Careful.. ;)
  - curun1r 8y ago
    I'm not saying I agree with the current restrictions on accredited investors, but there should be a middle ground between what we have now and what we had back when the dotcoms collapsed the market. Back then, there were stocks so risky they'd make today's ICO investors nervous if they'd been presented honestly. But they were sold as being relatively safe in a way that allowed early-stage investors to foist their failed bets on to the public. I witnessed first-hand a situation where executives engaged in outright fraud in an effort to kick the can far enough so that the VCs and execs could cash out. The aftermath of that fraud was two scapegoats who were sentenced to 18 months each and had to pay fines of less than 10% of the profit they made from their crime. If you're an individual who invested in the company and lost all your money, then fine...I can see the personal responsibility angle. But most of the losses were mutual funds and pensions where the losses were felt by people who had no hand in choosing that investment. Instead, that was financial professionals and the perverse incentives they're given that push them to seek outsized returns. There's a very good possibility that we're in an over-regulated state at the moment, but it's important to remember that in the complete absence of regulation, the public gets fleeced. The focus should be on finding the right regulation rather than vilifying the general concept of regulation.
deleted 8y ago
[deleted]

by tfha 8y ago

dstroot 8y ago

This. The public mkt used be the source of capital for companies like Facebook. Now it’s all private until most of the growth juice is squeezed out and now the public mkt is a liquidity event for the private investors. If/when they want to...

ricardonunez 8y ago
Isn't that because there a more wealthy individuals and many of them are connected to the same network?
chiefalchemist 8y ago
Just the same, pub mrkts used to be about companies and investing. Now they're just datasets to be milked and manipulated by quants, automated trading, etc. Perhaps the better conclusion of the NYT article should have been that these markets no longer carry the economic significance they once did?
nugget 8y ago
Facebook is up almost 500% from its IPO price, so even the very smart private equity and venture folks can misjudge when an opportunity has been completely milked.
- mattnewton 8y ago
  You’re in agreement with gp- he’s saying that an IPO used to be an opportunity like facebook, but now they just stay private like Uber until they believe most of the value is locked in.
- ataturk 8y ago
  True, but we're talking overall trends here, not just one FANG stock. Overall, private equity and big institutions have learned that they can fund companies and receive all the gains without ever dealing with the SEC or the general public. It's definitely a part of the story about the "rich getting richer." I'm a multi-millionaire right now, but I don't hold a candle to the wealth of even the CEO of the company I work for and I definitely don't hold a candle to the billionaires we love to talk about. My entire net worth is a rounding error for them! That is how insane the wealth imbalance has become and I say this as a "wealthy" libertarian-minded person. Reagan's trickle down was a lie. And while wealth is not a zero-sum game, it is certainly true that some wealthy people have a lock on wealth creation via their connections and their power position, which is something aspirant individuals such as myself will never have access to.
- scottlu2 8y ago
  Another reason to go public is because the SEC forces companies with 2000 stock owners (used to be 500 pre-2012) to file public disclosure documents similar to being public, so companies typically go public at that point. I’ve heard that some work around this limit by issuing IOUs indexed to the stock price. https://www.investopedia.com/terms/5/500-shareholder-threshold.asp https://www.investopedia.com/terms/5/500-shareholder-thresho...
  - woolvalley 8y ago
    You also can give RSUs, which don't actually become owned by the recipient until the company is acquired or become public. No fancy IOUs required. This IOU is denominated in stock units instead of a cash price.

curun1r 8y ago

OTOH, a lot of companies used to go public that had no business doing so. We went through a period where a lot of normal folks lost big portions of their retirement savings betting on public companies that really shouldn't have been in public markets. Yes, early-stage startups have the potential to return 100x, but they've also got the potential to lose 100%. That's the reason why we have the rules around qualified investors...they're people who are supposed to be in a position where losing their entire investment doesn't cause the kind of impact we were seeing when so many dotcom IPOs failed.

chrisco255 8y ago
Yes, so punish the 98% who invest responsibly because 2% go ape? I know plenty of people who lost their shirts investing in real estate in the 00's because supposedly that's a "safe" investment that retail investors can be trusted with since there's so many checks and balances. Gimme a break. All investments are risky. Public companies can go bankrupt. Real estate markets can crash. Shit hits the fan. People are either adults and take responsibility for their financial decisions or they're not. The legal distinction between who can buy what assets based on net worth is absolutely ridiculous.
- cft 8y ago
  Nanny state is killing public markets with regulation. The regulatory burden goes only one way- up and up. Only the largest established companies are semi-comfortable with this regime: it sets a barrier to entry. After all, they helped to lobby these regulations. That's all.
- eanzenberg 8y ago
  Woah woah are you recommending personal responsibility here? Careful.. ;)
- curun1r 8y ago
  I'm not saying I agree with the current restrictions on accredited investors, but there should be a middle ground between what we have now and what we had back when the dotcoms collapsed the market. Back then, there were stocks so risky they'd make today's ICO investors nervous if they'd been presented honestly. But they were sold as being relatively safe in a way that allowed early-stage investors to foist their failed bets on to the public. I witnessed first-hand a situation where executives engaged in outright fraud in an effort to kick the can far enough so that the VCs and execs could cash out. The aftermath of that fraud was two scapegoats who were sentenced to 18 months each and had to pay fines of less than 10% of the profit they made from their crime. If you're an individual who invested in the company and lost all your money, then fine...I can see the personal responsibility angle. But most of the losses were mutual funds and pensions where the losses were felt by people who had no hand in choosing that investment. Instead, that was financial professionals and the perverse incentives they're given that push them to seek outsized returns. There's a very good possibility that we're in an over-regulated state at the moment, but it's important to remember that in the complete absence of regulation, the public gets fleeced. The focus should be on finding the right regulation rather than vilifying the general concept of regulation.

deleted 8y ago

[deleted]