4 ms·

IPOs also kill a lot of companies. Now you have a new list of investors you are obligated to attend to, and what those investors what is not always to make your

IPOs also kill a lot of companies. Now you have a new list of investors you are obligated to attend to, and what those investors what is not always to make your company more successful, if it can make more money now.

kibwen 7mo ago
Not just the IPO. Being public at all subjects you to the perverse and destructive incentive of needing to maximize shareholder value. Just because some private companies take VC funding (and subject themselves to analogous forces) doesn't mean that's required or expected.
- gmd63 7mo ago
  Needing to maximize shareholder value is a myth. There is no law that requires you to do that - people like to use the idea as an excuse to do scummy business.
  - malfist 7mo ago
    Sure, it's a dubious legal requirement at best. But you try telling people that on an earnings call and watch your valuation plummet because you took a long position and the market wanted a next quarter position. And even if you don't care about selling your stock personally, it does impact your ability to raise funds.
    - elictronic 7mo ago
      Short term investors don’t matter. They are going to pull out and move to the next thing.
  - arcticbull 7mo ago
    Depends. In Michigan it is binding precedent, see Dodge v. Ford (1919). Delaware corporations must act in the interests of shareholders.
    - elictronic 7mo ago
      This case was specifically about dividends and long term shareholder value, not quarterly results.
    - rurp 7mo ago
      That's an incredibly vague standard and courts have repeatedly declined to get involved in second guessing management decisions. Aside from outright fraud or negligence executives can claim almost any business related decision is in the interest of shareholders because they have a reasonable expectation that the future benefits outweigh the costs. Judges aren't going to be delving into financial projections and expense reports to override the leaders of a business. A widget company could sponsor a soccer team or whatever and say the costs are worth it. Or that same company could not do that and say it's not worth it. Two opposite decisions that both would count as acting in the interest of shareholders.
      - arcticbull 7mo ago
        > That's an incredibly vague standard and courts have repeatedly declined to get involved Which courts? Corporate law is state-level. Delaware generally has some affordances for long-term strategic decisions.
bryanlarsen 7mo ago
The reverse is much more true. When private equity takes a public company private, there's a 50% chance they'll kill the company. Also, private companies fail at a much higher rate than public ones do.
- tptacek 7mo ago
  I don't think PE buyouts are the right comparison here; we're talking about companies that never go public versus the ones that do. And, of course private companies fail at a much higher rate. The set of private companies includes every company that doesn't succeed to the point where it has the realistic choice to go public. Again: wrong comparison.
  - bryanlarsen 7mo ago
    A general IPO is also not the right comparison. The events that kill companies are changes in control whether they happen from going public or going private. If Stripe IPO's, the Collison's will stay firmly in control, and approximately nothing will change at Stripe.
    - tptacek 7mo ago
      I'm not coming down on either side of the public/private thing, just saying that take-privates and failed small private companies aren't meaningful comparisons to make.
  - antiford2049 7mo ago
    when companies go public usually the easy money has been made, and for the growth to come back a lot of time might pass. frankly i dont know why would one go public today unless money is needed badly. Quarterly calls, filings, are one thing, dealing with vest bros asking "so how should we think about" questions on round tables or "whats an incrimental margin" musings as they clack away at their mini keyboards filling out their model no body can make sense of.. and then someone will publish a blog saying their company is gonna be extinct because of AI ... this is not for everybody thats for sure...
baxtr 7mo ago
So keep the profits only for the rich then? I rather see more IPOs for the rest of us.
- OGEnthusiast 7mo ago
  [dead]
- kdheiwns 7mo ago
  IPOs result in companies cutting corners and offering worse service so they can offer more benefits to rich stockholders this quarter, so they can cash out and burn the company to move on to the next one. Private companies plan for their existence 10 years down the road. Why should anyone be entitled to stocks of a company?

kibwen 7mo ago

Not just the IPO. Being public at all subjects you to the perverse and destructive incentive of needing to maximize shareholder value. Just because some private companies take VC funding (and subject themselves to analogous forces) doesn't mean that's required or expected.

gmd63 7mo ago
Needing to maximize shareholder value is a myth. There is no law that requires you to do that - people like to use the idea as an excuse to do scummy business.
- malfist 7mo ago
  Sure, it's a dubious legal requirement at best. But you try telling people that on an earnings call and watch your valuation plummet because you took a long position and the market wanted a next quarter position. And even if you don't care about selling your stock personally, it does impact your ability to raise funds.
  - elictronic 7mo ago
    Short term investors don’t matter. They are going to pull out and move to the next thing.
- arcticbull 7mo ago
  Depends. In Michigan it is binding precedent, see Dodge v. Ford (1919). Delaware corporations must act in the interests of shareholders.
  - elictronic 7mo ago
    This case was specifically about dividends and long term shareholder value, not quarterly results.
  - rurp 7mo ago
    That's an incredibly vague standard and courts have repeatedly declined to get involved in second guessing management decisions. Aside from outright fraud or negligence executives can claim almost any business related decision is in the interest of shareholders because they have a reasonable expectation that the future benefits outweigh the costs. Judges aren't going to be delving into financial projections and expense reports to override the leaders of a business. A widget company could sponsor a soccer team or whatever and say the costs are worth it. Or that same company could not do that and say it's not worth it. Two opposite decisions that both would count as acting in the interest of shareholders.
    - arcticbull 7mo ago
      > That's an incredibly vague standard and courts have repeatedly declined to get involved Which courts? Corporate law is state-level. Delaware generally has some affordances for long-term strategic decisions.

bryanlarsen 7mo ago

The reverse is much more true. When private equity takes a public company private, there's a 50% chance they'll kill the company. Also, private companies fail at a much higher rate than public ones do.

tptacek 7mo ago
I don't think PE buyouts are the right comparison here; we're talking about companies that never go public versus the ones that do. And, of course private companies fail at a much higher rate. The set of private companies includes every company that doesn't succeed to the point where it has the realistic choice to go public. Again: wrong comparison.
- bryanlarsen 7mo ago
  A general IPO is also not the right comparison. The events that kill companies are changes in control whether they happen from going public or going private. If Stripe IPO's, the Collison's will stay firmly in control, and approximately nothing will change at Stripe.
  - tptacek 7mo ago
    I'm not coming down on either side of the public/private thing, just saying that take-privates and failed small private companies aren't meaningful comparisons to make.
- antiford2049 7mo ago
  when companies go public usually the easy money has been made, and for the growth to come back a lot of time might pass. frankly i dont know why would one go public today unless money is needed badly. Quarterly calls, filings, are one thing, dealing with vest bros asking "so how should we think about" questions on round tables or "whats an incrimental margin" musings as they clack away at their mini keyboards filling out their model no body can make sense of.. and then someone will publish a blog saying their company is gonna be extinct because of AI ... this is not for everybody thats for sure...

baxtr 7mo ago

So keep the profits only for the rich then? I rather see more IPOs for the rest of us.

OGEnthusiast 7mo ago
[dead]
kdheiwns 7mo ago
IPOs result in companies cutting corners and offering worse service so they can offer more benefits to rich stockholders this quarter, so they can cash out and burn the company to move on to the next one. Private companies plan for their existence 10 years down the road. Why should anyone be entitled to stocks of a company?