You are making a mistaken assumption that only unprofitable companies need to fundraise, there are lots of profitable companies that want to raise capital to fund future growth (and their current cash flows aren’t enough).
Also I am very surprised that you named Github as a well run private company. As far I know, they were definitely not profitable (their spend was crazy) which is part of the reason the board took the acquisition offer from Microsoft. I really don’t think they are a good example of a well run private company.
You are correct that only companies that want capital IPO but that is by definition as an IPO is a capital raise. I believe that direct listing is an exception to this.
My assumption was that troubled ones also need it. So we should not be surprised that see so many controversial IPO listings recently.
Arguably, the reason IPOs happen less now than 20 years ago is because of the increase in regulatory requirements (particularly in the US), and the increase in available funding is a result of that.
Define significant. I see softbank throwing billions at tech companies.
IPOs seem serve as an `exit` for private investors who bought in while the company was private?
An IPO without raising new capital would make it more difficult to answer what every buyer should ask: "why are they so eager to sell?" It's a variation of plausible deniability.
>think of Facebook, which now has investor pressure to increase the price, which results in careless decisions about data handling, privacy etc
Trying to frame FB as a "bunch good kids under pressure" is a monumental mistake. Data has always been their business, selling ads and don't giving two shits about security is part of their DNA
> This is because of Facebook's dual-class share structure. Class B shares have 10 times the voting power of class A shares, and it just so happens that Zuckerberg owns more than 75% of class B stock. It means he has more than half of the voting power at Facebook.
https://www.businessinsider.com/facebook-investors-will-vote...
This doesn’t follow at all. Zuck still has control and they were careless before being public. I would suggest being public is the only thing that puts them in the spotlight for their shitty practices.
I hear you, but...
Meh, they say invest in companies who make products you use. I use the shit out of Uber and I don't plan on stopping even if the price goes up a bit. Now, I'm upper middle class, and I understand this isn't everyone's mindset, so I have no idea how the rest of the world feels.
However, there are locatios, like my crappy hometown where I grew up not so fortunate circumstances, where hailing a cab simply wasn't an option. If you want to have fun at a bar, you're driving home drunk.
Bottom line, I believe in this product and I only see it growing in importance - regardless of who is at the helm. That's my gut feel, and that's why I bought in a little today.
Just like taking investor money at anytime it can be a way to get extra cash to continue to build the company quickly.
The IPO system is wonky and there are bad examples but I don't think your rule makes sense.
Silicon Valley is obsessed with them because it's the only place where hundreds or thousands of employees are given significant equity; many of them have $100k - $1 million in vested equity 1-3 years into the job. You don't want that frozen in a private company indefinitely. You want liquidity to use it and to diversify your holdings. This doesn't mean you think the company will fail and you just want to "take the money and run".
A company can be profitable and still need more working capital to expand.
That being said, I don't know what to make of Uber, Lyft and WeWork (future) IPO's yet, but I am highly skeptical
Case in point, when you cash flow positive and idealy profitable even banks would happily finance your expansions. So unless as a company you want to be growing really fast, I don't see the added benefit of an IPO other than cash flow issues. Add too that the increased scrutiny by the authorities and I d prefer to be private.
Of course the same argument could be made the other way round.
An IPO is basically a way for the company to raise money, but tis time straight from the public. Usually when it gets harder and harder for them to attract private investors. The IPO listing basically guarantees that they won't take the public's billions and run.
Successful companies with perfect cash flows (think of Github, Valve, IKEA) always try to remain private. Because they have nothing to gain by raising more money. They can give their employees good bonuses and maintain control of the company.
This is by design. In Silicon Valley we are obsessed with them because they are the only meaningful exit for common employees (take the money and run mentality). The rest of the world doesn't care much because they see them for what they are.
Of course. Startup employees do not know they can sell their 'private' stock already, today. However, they need permissions to do so from the company's board (their answer will be NO. Here, saved you from asking. Or maybe they will offer to buy back the stock with shitty terms), and can only sell them to an accredited investor and not random people/public.
Many companies would be ran better if they remained private (think of Facebook, which now has investor pressure to increase the price, which results in careless decisions about data handling, privacy etc).