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This entire article is just a bunch of moaning and bitching about how things are not like they used to be back in the olden times when stock brokers could make

by hristov 16y ago

This entire article is just a bunch of moaning and bitching about how things are not like they used to be back in the olden times when stock brokers could make easy money without being too smart or working too hard by just answering the phone, executing orders and taking bribes for "research." (Note that stockbrokers can and still do make a lot of money nowadays, they just need to be much smarter and trickier about it.) There's a lot of wrong things in there but let me point out the most obvious. He talks about the abundance of 10 million ipo's in the 80's and 70's and the dearth of them today without even mentioning inflation. Let's take the only concrete example he provided: that of Intel which had an 8 million ipo in '71. In 2010 money, by using the CPI, this is 43 million (and note that the CPI tends to underestimate inflation). Are there 40 million IPO's today? Yes there are. This small list listing only the most recent IPOs on the NASDAQ shows at least two 40 mill IPOs: http://www.nasdaq.com/reference/IPOs.stm http://www.nasdaq.com/reference/IPOs.stm So a mere cursory examination of inflation completely destroys the only concrete example he provided.

danahn 16y ago
"More recently, watchers of the New York tech scene will recall Google’s purchase and shutdown of Dodge Ball." Interesting... I wonder when Google went public... undoubtedly it was back in the heyday of small tech IPOs, otherwise they would have had to sell themselves! Seriously though: His other example, Wal-Mart - inflation adjusted would be >$100mm today at IPO. To expand on hristov's list, some recent, smaller IPOs: AcelRx: $85mm market cap (ie. post-money) Kip's Bay Medical: $130mm market cap Trunkbow International: $170mm market cap Ossen Innovation: $87mm market cap SGOCO: $80mm market cap UniTek: $150mm market cap through the midpoint of November. Some slightly larger ones as well that I've skipped. Not to say that increased regulation and disclosure requirements have had a negligible chilling effect on the decision to go public, but this blows it out of proportion. What may be a legitimate worry is that companies are choosing to stay private through sales to VCs and PE funds, saving millions in public company costs and the time that would otherwise be devoted to dealing with the general investing public. Whether this is a good or bad thing is debatable, but it does keep these companies out of reach for certain investors.
watchandwait 16y ago
Yeah but the economy is a lot bigger now too. It is an indisputable fact that the U.S. IPO market smaller in both size and frequency. It isn't the only cause, but Sarbox has hammered public companies with huge regulatory costs for absolutely no benefit-- indeed, there is some evidence that corporate malfeasance is easier today because the rules are so complex, the true risks are easier to bury. SarBox certainly didn't stop the corruption in public mortgage finance and investment banks. You could argue that the law was tougher pre-SarBox-- at least Enron and WorldCom crooks went to jail.
- DTrejo 16y ago
  [...] at least Enron and WorldCom crooks went to jail. Good point — modern crooks got bonuses and their companies were saved from bankruptcy.
orijing 16y ago
I follow you except for the note about CPI underestimating inflation. There's actually a lot of debate about this (see http://en.wikipedia.org/wiki/United_States_Consumer_Price_Index#Perceived_overestimation_of_inflation http://en.wikipedia.org/wiki/United_States_Consumer_Price_In... for an informal look), and I personally think it overestimates it.
- adw 16y ago
  It's controversial in the UK too. My colleague, Simon (who used to be the FT's stats editor), writes about it on our data blog: http://byline.timetric.com/2011/02/14/uk-inflation-bad-decisions-from-misleading-figures/ http://byline.timetric.com/2011/02/14/uk-inflation-bad-decis... (which has subsequently been picked up by a couple of UK papers.)

by hristov 16y ago

danahn 16y ago

"More recently, watchers of the New York tech scene will recall Google’s purchase and shutdown of Dodge Ball." Interesting... I wonder when Google went public... undoubtedly it was back in the heyday of small tech IPOs, otherwise they would have had to sell themselves! Seriously though: His other example, Wal-Mart - inflation adjusted would be >$100mm today at IPO. To expand on hristov's list, some recent, smaller IPOs: AcelRx: $85mm market cap (ie. post-money) Kip's Bay Medical: $130mm market cap Trunkbow International: $170mm market cap Ossen Innovation: $87mm market cap SGOCO: $80mm market cap UniTek: $150mm market cap through the midpoint of November. Some slightly larger ones as well that I've skipped. Not to say that increased regulation and disclosure requirements have had a negligible chilling effect on the decision to go public, but this blows it out of proportion. What may be a legitimate worry is that companies are choosing to stay private through sales to VCs and PE funds, saving millions in public company costs and the time that would otherwise be devoted to dealing with the general investing public. Whether this is a good or bad thing is debatable, but it does keep these companies out of reach for certain investors.

watchandwait 16y ago

Yeah but the economy is a lot bigger now too. It is an indisputable fact that the U.S. IPO market smaller in both size and frequency. It isn't the only cause, but Sarbox has hammered public companies with huge regulatory costs for absolutely no benefit-- indeed, there is some evidence that corporate malfeasance is easier today because the rules are so complex, the true risks are easier to bury. SarBox certainly didn't stop the corruption in public mortgage finance and investment banks. You could argue that the law was tougher pre-SarBox-- at least Enron and WorldCom crooks went to jail.

DTrejo 16y ago
[...] at least Enron and WorldCom crooks went to jail. Good point — modern crooks got bonuses and their companies were saved from bankruptcy.

orijing 16y ago

I follow you except for the note about CPI underestimating inflation. There's actually a lot of debate about this (see http://en.wikipedia.org/wiki/United_States_Consumer_Price_Index#Perceived_overestimation_of_inflation http://en.wikipedia.org/wiki/United_States_Consumer_Price_In... for an informal look), and I personally think it overestimates it.

adw 16y ago
It's controversial in the UK too. My colleague, Simon (who used to be the FT's stats editor), writes about it on our data blog: http://byline.timetric.com/2011/02/14/uk-inflation-bad-decisions-from-misleading-figures/ http://byline.timetric.com/2011/02/14/uk-inflation-bad-decis... (which has subsequently been picked up by a couple of UK papers.)