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IPOs were historically done by unprofitable companies to raise funds. It's like seeking out VCs for another round of funding, but it's instead the public. Now,
by baccheion 7y ago
IPOs were historically done by unprofitable companies to raise funds. It's like seeking out VCs for another round of funding, but it's instead the public. Now, it's usually done to give insiders an exit.
What future growth would there be for buyers if the company went public already at its peak?
- will_brown 7y ago>What future growth would there be for buyers if the company went public already at its peak? I never said anything about peak. I said profit. Certainly a company making profit may want to go public to finance growth to make more profit (ie peak). IPOs/stock companies were not created for companies that were unprofitable.
- baccheion 7y agoIf growth rate continues as they project, buyers get a larger future bump/multiplier. What makes you say that? Proof? It was historically used to raise more funding to fuel growth, a function VCs can now fill (ie, then it would be likely to have a VC provide the larger sums required). Though VCs can fill such a gap, IPOs give insiders an exit.
- will_brown 7y ago>Proof? It’s your assertion show me proof IPOs are for “unprofitable companies”.
- cortesoft 7y agoIf a company is profitable, but there is a benefit to spending more money to grow faster, why wouldn't that company spend that profit to grow? If you believe growing the business is a good use of investor money, then wouldn't you also believe it is a good use of your profit?
- baccheion 7y agoIt makes sense, but people do all sorts of things for many reasons or no reason. New growth would have to be sustainable "indefinitely" or they'd have to worry about replacing it. In addition, even more revenue growth is then required to maintain the higher market cap.