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This is only true in general for tech companies because they tend to be "capital light"-- they don't require a lot of traditional capital assets such as factori
by eigenvalue 7y ago
This is only true in general for tech companies because they tend to be "capital light"-- they don't require a lot of traditional capital assets such as factories and warehouses. Generally, the only tech companies which require a lot of capital are the ones that are burning cash and need to replenish their coffers. But IPOs can greatly help jump-start the growth of more traditional companies which are often constrained by lack of cash as they grow sales organically, even if they are quite profitable on a net income basis. This allows these companies to open new plants and stores and to hire people to develop new products. As much as tech increasingly dominates the economy, it's far from the only industry that matters.
- hayksaakian 7y agoDo IPOs usually generate new funding for the IPO company? IPOs seem serve as an `exit` for private investors who bought in while the company was private?
- eigenvalue 7y agoThey do both. It's relatively rare for a company to IPO without raising fresh capital for the company. There are however often "secondary" share sales where only "selling shareholders" (rather than the company) receive the proceeds.
- deleted 7y ago[deleted]
- usrusr 7y ago> It's relatively rare for a company to IPO without raising fresh capital for the company. An IPO without raising new capital would make it more difficult to answer what every buyer should ask: "why are they so eager to sell?" It's a variation of plausible deniability.
- gmmeyer 7y agoIt's what Spotify did, I think it's a decent question but it also allows for liquidity, especially since it's such a big part of comp it's not unreasonable to list
- buzzdenver 7y agoAn IPO with out raising fresh capital is called a Direct Listing. Slack did it not long ago.