6 ms·

I wonder how good it is for companies to be allowed to grow so big and still be private? Would it makes sense to require any company with more than a billion do

I wonder how good it is for companies to be allowed to grow so big and still be private? Would it makes sense to require any company with more than a billion dollar valuation to be subject to all the same SEC requirements that public companies are? Could companies be blocked from raising money once the reach a crazy valuation like $1 billion?

bix6 9mo ago
It’s a major issue in VC. Main Street doesn’t get access until it’s time to offload. Prevents capital recycling for early stage as well.
kccqzy 9mo ago
That doesn’t make sense at all. The raison d’être of SEC is to protect regular mom-and-pop investors. A private company just doesn’t allow anyone to invest in them. Why should SEC rules apply? On what legal basis can you force a private company to divulge its financial details? Would you be happy if you, as an individual, have to divulge your account statements if your own net wealth reaches one million?
- volkk 9mo ago
  yeah it's a slippery slope forcing companies to go public at X valuation. who decides that? what number makes sense? etc. but i do think we need to somehow fix massively overpriced companies going public and dumping on retail
  - hobofan 9mo ago
    Nobody said anything about forcing them to go public, just to force them to adhere to reporting regulations.
- maxerickson 9mo ago
  It's a corporation, it exists at society's leisure. It might be necessary to create a legal basis, but it's just a matter of doing it. If the owners don't like it they can dissolve it.
  - artifishy_intel 9mo ago
    Exactly, let’s raise the regulatory burden on corporations to the equivalence point at which the producer of the most valuable product of the last 10 years considers dissolution. For society.
    - maxerickson 9mo ago
      I was responding to general the "how can you possibly regulate a corporation" attitude expressed in the comment, not the specific instance here.
  - mathisfun123 9mo ago
    > It might be necessary to create a legal basis, but it's just a matter of doing it Tell me you don't know anything about the law without telling me
- hobofan 9mo ago
  > The raison d’être of SEC is to protect regular mom-and-pop investors That's not the sole reason. They (should) also enforce a fair even playing field by preventing market manipulation (e.g. how Elon was tweeting about stock prices) and a few other things to "facilitate efficient markets and the formation of capital". > Why should SEC rules apply? Because private companies still fall under the jurisdiction of the SEC? See e.g. Theranos. > On what legal basis can you force a private company to divulge its financial details? On the to-be-created legal basis that aims to prevent bubble formation and the resulting fallout to the wider society? > Would you be happy if you, as an individual, have to divulge your account statements if your own net wealth reaches one million? Sure, why not? It's not a totally unheard of idea. In Norway everyones salary can be looked up.
- efficax 9mo ago
  SEC rules apply to private investment for the same reason they do to public investment: the world is full of scammers. In any case, you usually can't invest in a private company without being a "qualified" investor (already rich)
kooshball 9mo ago
there used to be rules that companies must be public if they have other 1000 investors. is this no longer the case?
- yieldcrv 9mo ago
  it's still the case, but there are never 1,000 investors, there's a couple dozen VC firms, SPVs, and individuals if you're smart. I don't think this is an SEC problem, they are fully aware that people subject to their jurisdiction can jump through many hoops to circumvent them. This shows consent on the investor's part well enough, and capital formation regulations do not burden the investor at all, they are only constitutional because they burden the organization raising capital, who simply needs to do a cursory check - not an in-depth one. (level of depth is based on which regulatory exemption is chosen) So as long as you separate concerns the SEC is satisfied.
  - solatic 9mo ago
    If employees get stock options and decide to exercise on exit, they count against the 500 unaccredited investor limit that would trigger reporting requirements. So companies that issue stock options do have an outside risk that enough employees will exit, exercise their stock options, and trigger a reporting requirement.
    - yieldcrv 9mo ago
      yeah, that's why those companies tend to offer liquidity strategically to lower their employee investor count
      - kooshball 9mo ago
        if an employee exercise options (but stays at the company) does that still count as one of 1000?
        yieldcrv 9mo ago
alden5 9mo ago
Having public investors forces companies to try their best to make a profit with the threat that you could get sued if you don’t. Sacrificing short term gains for long term goals is something public companies aren’t really good at. One good example where not having public investors has drastically helped a company is spacex. Almost every one of their programs has had really bad failures that public investors could’ve investigated and shut down. As someone who worked for them I really don’t want them to become public, forcing a company to do that seems crazy.

bix6 9mo ago

It’s a major issue in VC. Main Street doesn’t get access until it’s time to offload. Prevents capital recycling for early stage as well.

kccqzy 9mo ago

That doesn’t make sense at all. The raison d’être of SEC is to protect regular mom-and-pop investors. A private company just doesn’t allow anyone to invest in them. Why should SEC rules apply? On what legal basis can you force a private company to divulge its financial details? Would you be happy if you, as an individual, have to divulge your account statements if your own net wealth reaches one million?

volkk 9mo ago
yeah it's a slippery slope forcing companies to go public at X valuation. who decides that? what number makes sense? etc. but i do think we need to somehow fix massively overpriced companies going public and dumping on retail
- hobofan 9mo ago
  Nobody said anything about forcing them to go public, just to force them to adhere to reporting regulations.
maxerickson 9mo ago
It's a corporation, it exists at society's leisure. It might be necessary to create a legal basis, but it's just a matter of doing it. If the owners don't like it they can dissolve it.
- artifishy_intel 9mo ago
  Exactly, let’s raise the regulatory burden on corporations to the equivalence point at which the producer of the most valuable product of the last 10 years considers dissolution. For society.
  - maxerickson 9mo ago
    I was responding to general the "how can you possibly regulate a corporation" attitude expressed in the comment, not the specific instance here.
- mathisfun123 9mo ago
  > It might be necessary to create a legal basis, but it's just a matter of doing it Tell me you don't know anything about the law without telling me
hobofan 9mo ago
> The raison d’être of SEC is to protect regular mom-and-pop investors That's not the sole reason. They (should) also enforce a fair even playing field by preventing market manipulation (e.g. how Elon was tweeting about stock prices) and a few other things to "facilitate efficient markets and the formation of capital". > Why should SEC rules apply? Because private companies still fall under the jurisdiction of the SEC? See e.g. Theranos. > On what legal basis can you force a private company to divulge its financial details? On the to-be-created legal basis that aims to prevent bubble formation and the resulting fallout to the wider society? > Would you be happy if you, as an individual, have to divulge your account statements if your own net wealth reaches one million? Sure, why not? It's not a totally unheard of idea. In Norway everyones salary can be looked up.
efficax 9mo ago
SEC rules apply to private investment for the same reason they do to public investment: the world is full of scammers. In any case, you usually can't invest in a private company without being a "qualified" investor (already rich)

kooshball 9mo ago

there used to be rules that companies must be public if they have other 1000 investors. is this no longer the case?

yieldcrv 9mo ago
it's still the case, but there are never 1,000 investors, there's a couple dozen VC firms, SPVs, and individuals if you're smart. I don't think this is an SEC problem, they are fully aware that people subject to their jurisdiction can jump through many hoops to circumvent them. This shows consent on the investor's part well enough, and capital formation regulations do not burden the investor at all, they are only constitutional because they burden the organization raising capital, who simply needs to do a cursory check - not an in-depth one. (level of depth is based on which regulatory exemption is chosen) So as long as you separate concerns the SEC is satisfied.
- solatic 9mo ago
  If employees get stock options and decide to exercise on exit, they count against the 500 unaccredited investor limit that would trigger reporting requirements. So companies that issue stock options do have an outside risk that enough employees will exit, exercise their stock options, and trigger a reporting requirement.
  - yieldcrv 9mo ago
    yeah, that's why those companies tend to offer liquidity strategically to lower their employee investor count
    - kooshball 9mo ago
      if an employee exercise options (but stays at the company) does that still count as one of 1000?
      - yieldcrv 9mo ago

alden5 9mo ago

Having public investors forces companies to try their best to make a profit with the threat that you could get sued if you don’t. Sacrificing short term gains for long term goals is something public companies aren’t really good at. One good example where not having public investors has drastically helped a company is spacex. Almost every one of their programs has had really bad failures that public investors could’ve investigated and shut down. As someone who worked for them I really don’t want them to become public, forcing a company to do that seems crazy.