Consumer companies figured out they can raise money without ringing a bell on a trading floor. Took them long enough.
Secondary markets apparently work now. Private equity firms will buy your shares. Venture capital guys will sell theirs. Nobody needs to fly to New York and pretend Jim Cramer's opinion matters. The whole dog and ponies show got retired.
Here's what happened. Some CFO ran the numbers and realized going public costs $50 million in fees, creates quarterly earnings calls where analysts ask why you didn't beat estimates by three cents, and gives every day trader with a Robinhood account permission to call you a fraud on Twitter. Or he could just call up a private equity fund and sell them 8% of the company for whatever valuation his investment banker pulls out of thin air. Which sounds better?
The experts say this is because of improved liquidity. Translation: rich people found other rich people to trade with. They built their own little market. No retail investors allowed. No message boards. No diamond hands. Just a quiet Zoom call and a wire transfer.
Every founder who stayed private for an extra three years avoided exactly one thing. You. The guy who was going to buy twelve shares on IPO day, watch it drop 40%, then create a Change.org petition demanding the SEC investigate. They saw that coming. They said no thanks.
The technical analysis here is straightforward. If you never go public, retail traders can never lose money on your stock. It's the most charitable thing these companies have ever done. They're protecting you from yourself by making sure you can't buy what they're selling.
Going public used to be the finish line. Now it's just the beginning of having to explain yourself to people who think a P/E ratio is a wrestling move.
Photo by Markus Winkler on Unsplash
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