4 ms·

This seems like a good trend to me. Do an IPO to satisfy all the early investors, then go private so you can focus on long term growth and avoid most of the hor

This seems like a good trend to me. Do an IPO to satisfy all the early investors, then go private so you can focus on long term growth and avoid most of the horror of being a public company.

bushbaba 4y ago
With what money? If they had that money they could buy out most investors in the private market
- PaywallBuster 4y ago
  IPO at 1B, valuation drops to 200M after 1 year Buy back shares at 1/5th of the price
  - toomuchtodo 4y ago
    Public markets are turning into de facto bag holders. Buy a pig high on exuberance, sell it back to the company low.
  - ffssffss 4y ago
    With what money? For this to work the way you want, the company would have to be trading at lower than the book value of its assets, in which case you might as well liquidate it. If you get the money from debt, now you have to focus on servicing the debt, which is probably worse than what the street wants (revenue growth).
psychlops 4y ago
I'm not so sure. How does the average public investor benefit? I can see them losing money on the drop from the IPO, then locked out of future profits when the company goes private. Too cynical?
- jakelazaroff 4y ago
  They can reject the motion to go private, can they not?
  - psychlops 4y ago
    In theory and depending on the shareholder makeup. In practice, the board makes the decision. Recall the controversy of Musk making fun of the Twitter board for not acting in the shareholder interests.
    - jakelazaroff 4y ago
      As I understand it, the board is responsible for putting the motion to the shareholders (Twitter shareholders still had the option to reject the Musk buyout). In practice, the board makes the decision because retail shareholders tend to not vote. But they could, if most of them were about to take on a big loss!
      - psychlops 4y ago
        Yes, that's my thinking as well. iirc in that case, the board rejected the first buyout offer even though it was for more than the current share price.
        deleted 4y ago
        [deleted]
- bkwhopper 4y ago
  they benefit because it IPO'd at $20 and then went down to $10 so they are happy to get out at a premium price of $15. Instead of losing 50% on their original investment they are only losing 25%.
AlbertCory 4y ago
Private equity isn't a new idea. "Leveraged buyout" is the old term for it. In the bad old days, the LBO company would issue tons of long-term debt, which the company would have to pay interest on. To be able to do that, they'd have to lay people off, close unprofitable businesses, and otherwise go on a starvation diet. For these newer companies, the market cap probably isn't that high, so maybe the big bond issue doesn't happen. >Grill maker Weber Inc. WEBR ... agreed to go private last year for $8.05 a share, well below its $14 IPO price less than 18 months earlier. So, they collected a lot of money at $14, then collected more at $8, and in a few years when finances are better, they'll IPO again at $14. Nice business, except for the people who paid them $14 at the first IPO.
- cykros 4y ago
  I'd be curious if Medium Term Notes have a role to play here, particularly considering the size. A lot of the term benefits of some bond issues, without a lot of the red tape of actually going through a bond issuance.
- chrisgd 4y ago
  Is it their fault they found someone willing to pay $14/share?
  - AlbertCory 4y ago
    Who said it was? In a traditional IPO, the investors take the management on a road show, where they sell it to the buy-siders. They settle on a price that will clear most of the shares and not leave too much money on the table. Buying an IPO has traditionally been a losing game. There have been brief periods where IPO shares go up enormously on the first day, and an ordinary investor can't even get any. They're like found money for the lucky few. So the people who bought at $14 thought it was the latter case, but it was the former. Caveat emptor
deleted 4y ago
[deleted]

This seems like a good trend to me. Do an IPO to satisfy all the early investors, then go private so you can focus on long term growth and avoid most of the horror of being a public company.

bushbaba 4y ago

With what money? If they had that money they could buy out most investors in the private market

PaywallBuster 4y ago
IPO at 1B, valuation drops to 200M after 1 year Buy back shares at 1/5th of the price
- toomuchtodo 4y ago
  Public markets are turning into de facto bag holders. Buy a pig high on exuberance, sell it back to the company low.
- ffssffss 4y ago
  With what money? For this to work the way you want, the company would have to be trading at lower than the book value of its assets, in which case you might as well liquidate it. If you get the money from debt, now you have to focus on servicing the debt, which is probably worse than what the street wants (revenue growth).

psychlops 4y ago

I'm not so sure. How does the average public investor benefit? I can see them losing money on the drop from the IPO, then locked out of future profits when the company goes private. Too cynical?

jakelazaroff 4y ago
They can reject the motion to go private, can they not?
- psychlops 4y ago
  In theory and depending on the shareholder makeup. In practice, the board makes the decision. Recall the controversy of Musk making fun of the Twitter board for not acting in the shareholder interests.
  - jakelazaroff 4y ago
    As I understand it, the board is responsible for putting the motion to the shareholders (Twitter shareholders still had the option to reject the Musk buyout). In practice, the board makes the decision because retail shareholders tend to not vote. But they could, if most of them were about to take on a big loss!
    - psychlops 4y ago
      Yes, that's my thinking as well. iirc in that case, the board rejected the first buyout offer even though it was for more than the current share price.
      - deleted 4y ago
        [deleted]
bkwhopper 4y ago
they benefit because it IPO'd at $20 and then went down to $10 so they are happy to get out at a premium price of $15. Instead of losing 50% on their original investment they are only losing 25%.

AlbertCory 4y ago

Private equity isn't a new idea. "Leveraged buyout" is the old term for it. In the bad old days, the LBO company would issue tons of long-term debt, which the company would have to pay interest on. To be able to do that, they'd have to lay people off, close unprofitable businesses, and otherwise go on a starvation diet. For these newer companies, the market cap probably isn't that high, so maybe the big bond issue doesn't happen. >Grill maker Weber Inc. WEBR ... agreed to go private last year for $8.05 a share, well below its $14 IPO price less than 18 months earlier. So, they collected a lot of money at $14, then collected more at $8, and in a few years when finances are better, they'll IPO again at $14. Nice business, except for the people who paid them $14 at the first IPO.

cykros 4y ago
I'd be curious if Medium Term Notes have a role to play here, particularly considering the size. A lot of the term benefits of some bond issues, without a lot of the red tape of actually going through a bond issuance.
chrisgd 4y ago
Is it their fault they found someone willing to pay $14/share?
- AlbertCory 4y ago
  Who said it was? In a traditional IPO, the investors take the management on a road show, where they sell it to the buy-siders. They settle on a price that will clear most of the shares and not leave too much money on the table. Buying an IPO has traditionally been a losing game. There have been brief periods where IPO shares go up enormously on the first day, and an ordinary investor can't even get any. They're like found money for the lucky few. So the people who bought at $14 thought it was the latter case, but it was the former. Caveat emptor

deleted 4y ago

[deleted]