5 ms·

Is there any upside to staying private if you're profitable?

by fjabre 8y ago

ForHackernews 8y ago
You can throw lots of money at kooky, far out bets without having to answer to shareholders?
- rayvd 8y ago
  No SOX!
ghaff 8y ago
Sure. You're not nearly as beholden to shareholders with short-term investment horizons. See e.g. Dell going private.
nwhatt 8y ago
At some level an IPO is just like another raise. Any article or advice about not taking VC money applies.
thisisit 8y ago
It depends on the situation. Being private means the company doesn't have to follow compliance rules strictly. A good example of that is accounting rules. There are tons of companies out there which show non-GAAP profitability. But non-GAAP actually means companies can ignore stuff like ESOPs etc to create their balance sheets. When it comes to creating GAAP reports these same companies tend to be unprofitable by a large margin. Then there is the flip side too. Even if the company is profitable but not profitable enough. Let's say a hypothetical $1 in profit. And then company needs more than $1 to keep it afloat but no investor is interested. Then they have two options - raise debt or go public and raise money. Out of the two going public is slightly better.
nicoburns 8y ago
The only upside to going public if you're profitable is to get a quick injection. The IMO massive downside is that you've just lost control of your company.
- imh 8y ago
  That's not the only upside. It also provides liquidity to the employees you pay in equity, which is worth a lot.
hibikir 8y ago
Absolutely: A major one is that you can skirt all kinds of financial disclosure laws that apply to public companies. The world doesn't get to know your volume, your profit margin, or which of your divisions makes most if its money. This means your competition has a lot more trouble competing with you than if you have to provide public quarterly statements. I have seen examples of well run companies that just happened to be private, and then see industry reports that made hilariously wrong guesses regarding those key metrics that the competition would love to know. At the same time, it's far harder to provide great compensation to your employees if they can't sell their shares in the market, and at some point, your investors might be screaming for liquidity. But staying private as long as you can get away with is a good idea: It's just that few companies planning to be huge can.

Is there any upside to staying private if you're profitable?

by fjabre 8y ago

Is there any upside to staying private if you're profitable?

ForHackernews 8y ago

You can throw lots of money at kooky, far out bets without having to answer to shareholders?

rayvd 8y ago
No SOX!

ghaff 8y ago

Sure. You're not nearly as beholden to shareholders with short-term investment horizons. See e.g. Dell going private.

nwhatt 8y ago

At some level an IPO is just like another raise. Any article or advice about not taking VC money applies.

thisisit 8y ago

It depends on the situation. Being private means the company doesn't have to follow compliance rules strictly. A good example of that is accounting rules. There are tons of companies out there which show non-GAAP profitability. But non-GAAP actually means companies can ignore stuff like ESOPs etc to create their balance sheets. When it comes to creating GAAP reports these same companies tend to be unprofitable by a large margin. Then there is the flip side too. Even if the company is profitable but not profitable enough. Let's say a hypothetical $1 in profit. And then company needs more than $1 to keep it afloat but no investor is interested. Then they have two options - raise debt or go public and raise money. Out of the two going public is slightly better.

nicoburns 8y ago

The only upside to going public if you're profitable is to get a quick injection. The IMO massive downside is that you've just lost control of your company.

imh 8y ago
That's not the only upside. It also provides liquidity to the employees you pay in equity, which is worth a lot.

hibikir 8y ago

Absolutely: A major one is that you can skirt all kinds of financial disclosure laws that apply to public companies. The world doesn't get to know your volume, your profit margin, or which of your divisions makes most if its money. This means your competition has a lot more trouble competing with you than if you have to provide public quarterly statements. I have seen examples of well run companies that just happened to be private, and then see industry reports that made hilariously wrong guesses regarding those key metrics that the competition would love to know. At the same time, it's far harder to provide great compensation to your employees if they can't sell their shares in the market, and at some point, your investors might be screaming for liquidity. But staying private as long as you can get away with is a good idea: It's just that few companies planning to be huge can.