7 ms·

The End of the IPO as We Know It?

83 points by apsec112 7y ago

stopads 7y ago
Everyone is getting tired of the bullshit industrial complex that so many companies seem to tread in. If you have zero plans for profitability, zero plans for sustainability, zero ideas for actually creating a new useful product or service then you shouldn't be forcing a semi-fraudulent IPO through the door that is s transparent cash grab for the stakeholders. This is a good thing. The number doesn't always need to go up. Especially when it's all bullshit.
- gruglife 7y ago
  But that’s the great thing about the market, there still have to be buyers and the public is getting wise about these “semi-fraudulent” IPOs (see WeWork). This is exactly how the market is suppose to work.
  - deleted 7y ago
    [deleted]
  - Retric 7y ago
    Markets can’t really get smarter over time as they represent all investors. From young teenagers to experienced institutional investors. You just get cycles of people learning the same lessons over again, but that doesn’t last long term just at best a few decades.
    - mantas 7y ago
      That's not how evolution works. The new generations learns aggregated knowledge of previous generations really fast. Babies don't have to invent their toys from scratch, huh?
      - rbrtl 7y ago
        That also isn't how evolution works... You're conflating evolution with education. Education also varies from one generation to the next as the educators learn from their own experience, or are imposed upon by government in curricula and standardisation.
2J0 7y ago
The primary buyers of newly issued stocks are precisely who have been forced into buying artificially supply constrained private shares with in many professional opinions made available to me under assurances of my probity, unlawful restraint and restrictions and highly unnatural interpretations of GAAP. I recently received a three word share report from a former limited partner and it read "Out Of Expletives ". Okay six words or three plus one acronym for "E&EO" ended the message. Price increases are macro driven or trading and execution or business distribution factor sensitive appreciation. There's no real economic growth. I am presently held from advancing my own business because such a incredible burden of anecdotal evidence that's my direct experience has accumulated until I realised only this year that I am duty bound to account for and attempt to report the findings however that may be possible, before committing to a major investment. I owe my partners my experience and that's become a consideration under my employment contract as my responsibility to so do. At least I am sure I will not be imprudent if I do spend the necessary time in writing. Health forced me into a prolonged period of sabbatical and I am changed by my experiences. I genuinely fear for a complete paralysed economy and not even paralysis is correct nomenclature because that word implies a otherwise viable body capable of resuscitation. I think we killed capitalism as we thought we knew it and we have all become parasitic unknowingly and blind to the ways we so became. I suffered memory loss from a head trauma and actually had to somehow reboot my system for thought about every aspect of my life. My business was all consuming to my near death by self neglect and the upshot is I regained or just gained a humanity I cannot believe but know was horribly diminished if not lost over almost thirty years pursuing a ridiculous ambition without any rest. I never noticed the time passing but I was matrix style patched in to the business world and ignorant of everything else. Learning about business and economic opportunities from scratch in much needed normal conditions instead of catapulted from a exclusive education has confronted me with a sense of total terror at the frailty of our economic civilisation. Even more frightening and yet optimistic I discovered that the communities of computing nerds actually are most attuned to global risks and dangers. Which means that the most important knowledge is altogether compartmented separately from political potential for action. This isn't non obvious of course but I think it's a different level of separation from forty years ago and now the majority of logical arguments are happening apart from mainstream media and society. Because every science is become just "tech news" as if they saw the world of science through a Slashdot filter
throwGuardian 7y ago
Not the end of the IPO - end of private cabals who shake hands and sermon a 10X P:E price on a comparable stock/product currently public at 1X P:E. Despite the jowly greed of influential VCs et al. they cannot bend reality
kludgekraft 7y ago
Late stage VC and PE went after sky-high valuations, startups didn't see the need to go IPO for much longer than the yesteryears. At some point, they run out of money and IPO is their only option to raise afresh. VC/PE must correct this by bringing their valuations inline with the IPO market and be just a stepping stone and not the ultimate step in the fundraising market
- bradleyjg 7y ago
  That rather depends on who's right and who's wrong, doesn't it? If late stage VC and PE are by and large better at understanding the net present value of all future cash flows than the public markets, the best way forward is for them to find a way to provide liquidity for founders, employees, and earlier stage investors other than going public. Lowing valuations instead would be leaving money on the table for all those existing stakeholders.
  - kludgekraft 7y ago
    Completely agree. But I'm guessing today's late stage VC and PE still think of IPO as the ultimate 'exit'. If the investors sign up to provide enough liquidity or even providing partial exits to founders/employees, they'll have provided the company enough leeway to turn profitable.
Lazare 7y ago
I would summarise this post as: "Public markets didn't like a few bad Softbank backed IPOs. This clearly is not because only Masayoshi Son loves giant bonfires they can shovel cash into, but instead means that public markets are just horribly broken, and everything we think we know about finance, economics, and the market is wrong." After listing a bunch of loss-making stinkers (Uber, Lyft, Peloton, Pinterest, Caspar) we get the line: > How is it that the hottest growth companies have stumbled out of the gate? If you have to ask the question of why public markets might not think a company whose business strategy is mailing people mattresses below cost is worth a billion dollars, then really, you're not going to understand the answer. Also, note this: > And B2B player Zoom, the videoconferencing software company, which had a juicy pop of 72% on its first day of trading, has seen its fortunes seesaw, falling from a high of $102 to roughly $88 at press time, even as the broader market, especially the tech sector, has been on a tear. Zoom is one of the only actual profitable companies discussed, but the author tosses them into the list of disasters like WeWork. But let's unpack that: They IPOed at $36 a share, and they're down to $88, and the lesson here is "oh man, public markets hate startups"? ...like, really? The entire article is just one long "wow, profitable companies are valuable, I wonder what deeper lesson entirely unrelated to profitably we can draw from this if we ignore the obvious answer". > But as they watch the public drubbing suffered by the likes of Adam Neumann [...] founders are more apt to see themselves as mistreated and even harassed by various gatekeepers If you are a founder, and the person you feel the closest kinship too is Adam Neumann, you probably don't deserve to be treated very well by the markets. The issue is you. What a infuriatingly obtuse article.
- jdm2212 7y ago
  When there's nothing interesting to be said about a subject, there's a really strong selection bias for only un-insightful things to be said about the subject. Like, no one's gonna write a whole medium post about "Companies with crappy business models get low valuations. Companies with good business models get better valuations"...
  - jfengel 7y ago
    It would actually be a refreshing change for companies with bad business models to get worse valuations. Valuation is hard, and the article's whole fascination with IPO's is about the idea that the people setting the initial price will find out how wrong they were on the first day. There's a fetish for being hoping they were lowballing, and people rush in to pay more, such that the lucky first in line make a big score in a few hours. Even if people pay attention to fundamentals, it's tricky. It's not unreasonable for a company to try to raise money before they turn a profit. But so many people turn it into kabbala, dismissing any notion that the returns are related to the company's future earnings, instead looking to the runes to guess what other people's guesses are going to be.
Gonzih 7y ago
Article provides really some terrible examples of IPOs that failed. All of those companies were unable to deliver revenue even close to what were asummed during private investement rounds. System is not broken and it punishes disfunctiinal businesses pretty well.
- kovek 7y ago
  You write that the system punishes the businesses. Does it also punish those who were lying in their work towards the IPO?
duxup 7y ago
The lack of disclosure...or worse Spotify's argument makes me skeptical of this alternative route.
Traster 7y ago
Does anyone else find it quite funny that the article about the Renaissance IPO Index is literally headlined: >2019 IPO Market: Better Than the Headlines and literally says: > beyond these headline-grabbing disappointments, the IPO market had a mostly good year. If you're going to write a boring cherry-picked article making the case the sky is falling, here's a tip: Don't literally cite research that says "The data says the sky isn't falling even though people are writing articles about it" Shouldn't we be talking about the opposite of this article. If IPOs are not making great returns, shouldn't that indicate VCs are dying, not IPOs? Of course it doesn't matter because IPOs are fine and so are VCs.
peter303 7y ago
The majority of unicorn valuations are bogus- small slices purchased at astronomical prices to make the valuation appear an order of magnitude higher. A true stock offering, whether using conventional IPO banks, or creative methods like Google did, obtains a more accurate valuation.

83 points by apsec112 7y ago

Everyone is getting tired of the bullshit industrial complex that so many companies seem to tread in. If you have zero plans for profitability, zero plans for sustainability, zero ideas for actually creating a new useful product or service then you shouldn't be forcing a semi-fraudulent IPO through the door that is s transparent cash grab for the stakeholders. This is a good thing. The number doesn't always need to go up. Especially when it's all bullshit.

gruglife 7y ago
But that’s the great thing about the market, there still have to be buyers and the public is getting wise about these “semi-fraudulent” IPOs (see WeWork). This is exactly how the market is suppose to work.
- deleted 7y ago
  [deleted]
- Retric 7y ago
  Markets can’t really get smarter over time as they represent all investors. From young teenagers to experienced institutional investors. You just get cycles of people learning the same lessons over again, but that doesn’t last long term just at best a few decades.
  - mantas 7y ago
    That's not how evolution works. The new generations learns aggregated knowledge of previous generations really fast. Babies don't have to invent their toys from scratch, huh?
    - rbrtl 7y ago
      That also isn't how evolution works... You're conflating evolution with education. Education also varies from one generation to the next as the educators learn from their own experience, or are imposed upon by government in curricula and standardisation.

2J0 7y ago

The primary buyers of newly issued stocks are precisely who have been forced into buying artificially supply constrained private shares with in many professional opinions made available to me under assurances of my probity, unlawful restraint and restrictions and highly unnatural interpretations of GAAP. I recently received a three word share report from a former limited partner and it read "Out Of Expletives ". Okay six words or three plus one acronym for "E&EO" ended the message. Price increases are macro driven or trading and execution or business distribution factor sensitive appreciation. There's no real economic growth. I am presently held from advancing my own business because such a incredible burden of anecdotal evidence that's my direct experience has accumulated until I realised only this year that I am duty bound to account for and attempt to report the findings however that may be possible, before committing to a major investment. I owe my partners my experience and that's become a consideration under my employment contract as my responsibility to so do. At least I am sure I will not be imprudent if I do spend the necessary time in writing. Health forced me into a prolonged period of sabbatical and I am changed by my experiences. I genuinely fear for a complete paralysed economy and not even paralysis is correct nomenclature because that word implies a otherwise viable body capable of resuscitation. I think we killed capitalism as we thought we knew it and we have all become parasitic unknowingly and blind to the ways we so became. I suffered memory loss from a head trauma and actually had to somehow reboot my system for thought about every aspect of my life. My business was all consuming to my near death by self neglect and the upshot is I regained or just gained a humanity I cannot believe but know was horribly diminished if not lost over almost thirty years pursuing a ridiculous ambition without any rest. I never noticed the time passing but I was matrix style patched in to the business world and ignorant of everything else. Learning about business and economic opportunities from scratch in much needed normal conditions instead of catapulted from a exclusive education has confronted me with a sense of total terror at the frailty of our economic civilisation. Even more frightening and yet optimistic I discovered that the communities of computing nerds actually are most attuned to global risks and dangers. Which means that the most important knowledge is altogether compartmented separately from political potential for action. This isn't non obvious of course but I think it's a different level of separation from forty years ago and now the majority of logical arguments are happening apart from mainstream media and society. Because every science is become just "tech news" as if they saw the world of science through a Slashdot filter

throwGuardian 7y ago

Not the end of the IPO - end of private cabals who shake hands and sermon a 10X P:E price on a comparable stock/product currently public at 1X P:E. Despite the jowly greed of influential VCs et al. they cannot bend reality

kludgekraft 7y ago

Late stage VC and PE went after sky-high valuations, startups didn't see the need to go IPO for much longer than the yesteryears. At some point, they run out of money and IPO is their only option to raise afresh. VC/PE must correct this by bringing their valuations inline with the IPO market and be just a stepping stone and not the ultimate step in the fundraising market

bradleyjg 7y ago
That rather depends on who's right and who's wrong, doesn't it? If late stage VC and PE are by and large better at understanding the net present value of all future cash flows than the public markets, the best way forward is for them to find a way to provide liquidity for founders, employees, and earlier stage investors other than going public. Lowing valuations instead would be leaving money on the table for all those existing stakeholders.
- kludgekraft 7y ago
  Completely agree. But I'm guessing today's late stage VC and PE still think of IPO as the ultimate 'exit'. If the investors sign up to provide enough liquidity or even providing partial exits to founders/employees, they'll have provided the company enough leeway to turn profitable.

Lazare 7y ago

I would summarise this post as: "Public markets didn't like a few bad Softbank backed IPOs. This clearly is not because only Masayoshi Son loves giant bonfires they can shovel cash into, but instead means that public markets are just horribly broken, and everything we think we know about finance, economics, and the market is wrong." After listing a bunch of loss-making stinkers (Uber, Lyft, Peloton, Pinterest, Caspar) we get the line: > How is it that the hottest growth companies have stumbled out of the gate? If you have to ask the question of why public markets might not think a company whose business strategy is mailing people mattresses below cost is worth a billion dollars, then really, you're not going to understand the answer. Also, note this: > And B2B player Zoom, the videoconferencing software company, which had a juicy pop of 72% on its first day of trading, has seen its fortunes seesaw, falling from a high of $102 to roughly $88 at press time, even as the broader market, especially the tech sector, has been on a tear. Zoom is one of the only actual profitable companies discussed, but the author tosses them into the list of disasters like WeWork. But let's unpack that: They IPOed at $36 a share, and they're down to $88, and the lesson here is "oh man, public markets hate startups"? ...like, really? The entire article is just one long "wow, profitable companies are valuable, I wonder what deeper lesson entirely unrelated to profitably we can draw from this if we ignore the obvious answer". > But as they watch the public drubbing suffered by the likes of Adam Neumann [...] founders are more apt to see themselves as mistreated and even harassed by various gatekeepers If you are a founder, and the person you feel the closest kinship too is Adam Neumann, you probably don't deserve to be treated very well by the markets. The issue is you. What a infuriatingly obtuse article.

jdm2212 7y ago
When there's nothing interesting to be said about a subject, there's a really strong selection bias for only un-insightful things to be said about the subject. Like, no one's gonna write a whole medium post about "Companies with crappy business models get low valuations. Companies with good business models get better valuations"...
- jfengel 7y ago
  It would actually be a refreshing change for companies with bad business models to get worse valuations. Valuation is hard, and the article's whole fascination with IPO's is about the idea that the people setting the initial price will find out how wrong they were on the first day. There's a fetish for being hoping they were lowballing, and people rush in to pay more, such that the lucky first in line make a big score in a few hours. Even if people pay attention to fundamentals, it's tricky. It's not unreasonable for a company to try to raise money before they turn a profit. But so many people turn it into kabbala, dismissing any notion that the returns are related to the company's future earnings, instead looking to the runes to guess what other people's guesses are going to be.

Gonzih 7y ago

Article provides really some terrible examples of IPOs that failed. All of those companies were unable to deliver revenue even close to what were asummed during private investement rounds. System is not broken and it punishes disfunctiinal businesses pretty well.

kovek 7y ago
You write that the system punishes the businesses. Does it also punish those who were lying in their work towards the IPO?

duxup 7y ago

The lack of disclosure...or worse Spotify's argument makes me skeptical of this alternative route.

Traster 7y ago

Does anyone else find it quite funny that the article about the Renaissance IPO Index is literally headlined: >2019 IPO Market: Better Than the Headlines and literally says: > beyond these headline-grabbing disappointments, the IPO market had a mostly good year. If you're going to write a boring cherry-picked article making the case the sky is falling, here's a tip: Don't literally cite research that says "The data says the sky isn't falling even though people are writing articles about it" Shouldn't we be talking about the opposite of this article. If IPOs are not making great returns, shouldn't that indicate VCs are dying, not IPOs? Of course it doesn't matter because IPOs are fine and so are VCs.

peter303 7y ago

The majority of unicorn valuations are bogus- small slices purchased at astronomical prices to make the valuation appear an order of magnitude higher. A true stock offering, whether using conventional IPO banks, or creative methods like Google did, obtains a more accurate valuation.