The Wall Street Journal took note that many companies with high valuations prefer to stay private these days. Mostly, it is talking about the types of tech companies that went public much earlier in their life cycle in the late nineties.
A number of Internet, software and consumer companies are raising huge sums in private deals that enable them to postpone initial public offerings for years, if not indefinitely. Moreover, they often negotiate these private placements directly with investors, bypassing banks.
The article mostly deals with how investment bankers more used to IPOs are dealing with large companies that prefer to raise money privately.
For most people, the woes of investment bankers struggling to meet changing business conditions is not particularly interesting. However, what I find interesting is the assumption that these companies would necessarily want to go public. If you don’t have to, why would you subject yourself to periodic reporting, plaintiffs’ lawyers in the securities bar, Sarbanes-Oxley, etc…?
In addition, the universe of investors for private companies is expanding.
Banks trying to woo more private-placement clients said they provide a needed service. Companies are staying private longer partly because the number of investors interested in private deals has expanded significantly, they said.
Many of these companies are also less dependent on funding from the public markets.
“What’s changed is that companies are getting so quickly from startup to real traction,” said Dan Dees, global head of technology, media and telecommunications banking at Goldman. “You can’t just wait for the IPO pitch.”
And yet, this is what critics used to complain about for IPO companies: they were too immature for the public markets.
To me, it still comes down to an essential question for the issuer: Why do you want to go public. Because ‘go’ is only a part of it. ‘Being’ public is the long-term expense and obligation.