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There's tradeoffs. Public companies are more boring, but having permanent capital does bring a little more stability. Different things for different people. T

There's tradeoffs. Public companies are more boring, but having permanent capital does bring a little more stability. Different things for different people. To borrow from Peter T, it's much easier for private firms to get from 0 to 1. Public companies seem to be better on globalizing, where standards and process are important. Neither is universally better. (I've moved to steadily smaller companies in my career)

GrinningFool 12y ago
I'm not sure what you mean about being publicly traded gets you permanent capital? THe only capital you receive is from the stocks your company sells. All the subsequent trading doesn't benefit the company - after the IPO proceeds (and subsequent offerings that may be issued), the stocks are only a liability to the issuing company.
- eldavido 12y ago
  Technical nit: stock is equity, which is absolutely NOT a liability in the technical sense of the term. Generally liabilities are something that has to be paid back on a more-or-less predefined schedule; equity is more "permanent" (but it's really a spectrum with points in between like "convertible debt" and "preferred debt" and such, which have some features of both.) The point about "permanence" refers to the lack of any obligation by the issuer to pay it back on any schedule. That changes of ownership can happen without the company really knowing/caring is a huge feature of public equity markets, compared to say, a private partnership where, if an individual wants to exit, it might lead to business closure because the partnership needs to liquidate in order to cash out the partner, or the partner needs to find someone else to buy their partnership stake, which may be difficult as partnerships aren't as standardized as NYSE-traded equity with regard to reporting, control, and legal precedent. tl;dr share capitalism has some really nice benefits that too often go overlooked.
  - cordite 12y ago
    It also means that the CEO is always busy talking to wall-street (or so says the CEO of the private company I work for). Although personal stake at the founding is something that private companies (such as mine) struggle with as things get larger.
voidlogic 12y ago
> Public companies are more boring, but having permanent capital does bring a little more stability Privately held corporations can be very large too. Since there are fewer captains and stakeholders I would argue that at the same given size privately held corporations are more stable.
- cratermoon 12y ago
  Ikea, for example, is private. Dell went private not too long ago, too.
- mathattack 12y ago
  There are tradeoffs. And the tradeoffs shift over time. Sarbanes-Oxley has (on the margin) made it more costly to be a public company, so we're seeing companies hold out over time. (One can are argue that this strengthened the system - I will leave that argument for elsewhere) There are some absolutes that force a company's hand. 1 - If they have VC money and the investors want an exit, they have to sell it to someone. It's very rare that the current owners will have the money to do this. (If they needed $10mm to grow, will they have $100mm liquid to help someone exit?) If they sell to a PE firm, the problem just gets pushed down the road 5 years. 2 - There are limits to the # of shareholders a private company can have. If you believe in employee ownership, this becomes an issue as private companies grow.
  - eldavido 12y ago
    Re (1), the big story of late is the growing size of private equity funds and companies' ability to raise ever-growing amounts of money without going public. Digital Sky Technologies (DST) did some early investments in facebook that arguably started the trend; Uber just raised two billion+ dollar rounds of funding without an IPO. This was completely unheard-of 20 years ago. [1] Re (2) I don't think you're right, I think it's that there's a cap on the number of shareholders until disclosure becomes mandatory. Can you give a citation for your view? [1] https://gigaom.com/2012/05/08/why-facebook-and-silicon-valley-owe-it-all-to-moscow/ https://gigaom.com/2012/05/08/why-facebook-and-silicon-valle...

GrinningFool 12y ago

I'm not sure what you mean about being publicly traded gets you permanent capital? THe only capital you receive is from the stocks your company sells. All the subsequent trading doesn't benefit the company - after the IPO proceeds (and subsequent offerings that may be issued), the stocks are only a liability to the issuing company.

eldavido 12y ago
Technical nit: stock is equity, which is absolutely NOT a liability in the technical sense of the term. Generally liabilities are something that has to be paid back on a more-or-less predefined schedule; equity is more "permanent" (but it's really a spectrum with points in between like "convertible debt" and "preferred debt" and such, which have some features of both.) The point about "permanence" refers to the lack of any obligation by the issuer to pay it back on any schedule. That changes of ownership can happen without the company really knowing/caring is a huge feature of public equity markets, compared to say, a private partnership where, if an individual wants to exit, it might lead to business closure because the partnership needs to liquidate in order to cash out the partner, or the partner needs to find someone else to buy their partnership stake, which may be difficult as partnerships aren't as standardized as NYSE-traded equity with regard to reporting, control, and legal precedent. tl;dr share capitalism has some really nice benefits that too often go overlooked.
- cordite 12y ago
  It also means that the CEO is always busy talking to wall-street (or so says the CEO of the private company I work for). Although personal stake at the founding is something that private companies (such as mine) struggle with as things get larger.

voidlogic 12y ago

> Public companies are more boring, but having permanent capital does bring a little more stability Privately held corporations can be very large too. Since there are fewer captains and stakeholders I would argue that at the same given size privately held corporations are more stable.

cratermoon 12y ago
Ikea, for example, is private. Dell went private not too long ago, too.
mathattack 12y ago
There are tradeoffs. And the tradeoffs shift over time. Sarbanes-Oxley has (on the margin) made it more costly to be a public company, so we're seeing companies hold out over time. (One can are argue that this strengthened the system - I will leave that argument for elsewhere) There are some absolutes that force a company's hand. 1 - If they have VC money and the investors want an exit, they have to sell it to someone. It's very rare that the current owners will have the money to do this. (If they needed $10mm to grow, will they have $100mm liquid to help someone exit?) If they sell to a PE firm, the problem just gets pushed down the road 5 years. 2 - There are limits to the # of shareholders a private company can have. If you believe in employee ownership, this becomes an issue as private companies grow.
- eldavido 12y ago
  Re (1), the big story of late is the growing size of private equity funds and companies' ability to raise ever-growing amounts of money without going public. Digital Sky Technologies (DST) did some early investments in facebook that arguably started the trend; Uber just raised two billion+ dollar rounds of funding without an IPO. This was completely unheard-of 20 years ago. [1] Re (2) I don't think you're right, I think it's that there's a cap on the number of shareholders until disclosure becomes mandatory. Can you give a citation for your view? [1] https://gigaom.com/2012/05/08/why-facebook-and-silicon-valley-owe-it-all-to-moscow/ https://gigaom.com/2012/05/08/why-facebook-and-silicon-valle...