These days, companies are going waiting a couple years longer than they would normally to go public. After Facebooks' botched public debut, companies are waiting until they are, without question, financially stable. High-speed computer trading and trading glitches are being held responsible for the negative effects of companies going public. Also, last week, and errant tweet caused a "flash crash", which sent stocks plummeting for a few minutes before they regained composure. With how technical our world has become these days, risks like these almost outweigh the rewards of going public. Some investment hedge fund managers would advise against companies going public today as they are not convinced that the exchange has fixed the problems which caused Facebook to have such a terrible debut. CEOs also have to worry about activist shareholders, who basically own the company and have playing large roles in the structural changes of public companies. Many say decades ago, CEOs would do whatever they could to not listen to the shareholders and get them out of the way. These days, the companies understand they are owned by them, and have no choice but to listen to what they have to say.
http://money.cnn.com/2013/05/01/investing/companies-ipo/index.html?iid=HP_River
We cannot base IPO's on one company. Facebook's stock was predicted to be a bust since there was so much over hype of the companies IPO. I agree with you that having shareholders deter companies from doing exactly what they want but it also raises much needed capital in the process. CEO's are often conflicted by shareholders interest and often interfere with the companies purpose and goals. Overall pretty interesting article.
ReplyDeleteI agree that going public can be very risky for a company, and along with the risks involved, there are huge amounts of administrative costs that go into it as well. Issuing stock does have the potential to raise huge amounts of capital, but I agree that one disadvantage is having to satisfy the needs of the shareholders. However, shareholders only have a limited influence on a company. Once they elect a Board of Directors, they make most of the decisions along with the CEO.
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