EC HH The Pre-Cognitive Anti-Trust Violation: How The Decimation Of The IPO Market Has Hurt The Economy And Worse

Personally, I think they are wrong.  But it’s their company. Their decision.

Unfortunately the momentum of  the “Stay Private” movement is devastating our economy.

Here is how:

  1. Hundreds of Billions of dollars from investors , from mom and pops to huge funds, are tied up in private companies and returning nothing. That capital is dead money.  It doesn’t matter what it is marked to on their books.  It is dead. It can not be reinvested anywhere. That hurts our economy.
    1. We aren’t talking about dead money for a few weeks or months, we are talking YEARS. Okay, maybe not just years, maybe a DECADE or more in some cases.
    2. The balance sheets of probably 80pct of those investors is massively overstated because those private companies can’t or won’t go public. That creates its own potential issues. Because of the uncertain liquidity of those hundreds of billions of dollars, the remaining liquid assets of those investors is placed far more conservatively.
  2. Not only is that money dead to investors, it is dead to employees of those private companies. Sure, some of the hottest companies that find raising their 4th or 5th round easy may return some to key employees, but those companies total how many, 10, out of how many tens of thousands of private companies that have raised capital ? And even then it's only upper management.  The rest of the poor people working for those companies are most likely to stay that way. Poor.
  3. The dead money tied up in stock owned by anyone not in top management is one key reason that income inequality continues to get worse. Let's do some guessing with math.
    1. Let's say that like in 1998, 300 operating companies went public.  And let’s make a guess that each of those 300 companies had 200 employees that had vested stock options. That is 60k employees with stock in a newly public company.  If the average value of that stock at IPO was $25,000, that is $1,500,000,000 increase in liquid net-worth to everyday Americans in a single year .  If the majority of those companies continue to grow, then the value accrued to paid by the hour and salaried admins, analysts, security guards, receptionists, etc will  enable them to participate in the same wealth creation that the One Percent does. That is of no small importance 
      1. As a point of reference, here is an article that says that more than half of America has a net worth of less than 25k.  So by working for a company that goes public, you immediately increase your chances of having a net-worth greater than half the country. To me, that is a big deal.
      2. Replicate the wealth impact each year and we can do more for the net-worth of hard-working Americans than any government policy or tax change.  Nothing else can add thousands of people a year to the roles of the  Top 50pct’ers like a revitalized IPO market.
  4. When private companies can’t or won’t go public, they become easy pickings for their competitors to buy them.
    1. In my not so humble opinion, this is the ultimate productivity and investment killer in the USA today.
    2. One of the reasons today’s 3700 public companies hoard cash is  because they know that rather than investing in uncertain R&D and productivity enhancements to protect them against the “Innovators Dilemma”, upstart companies that could disrupt them and their industries, they can simply buy those companies.  They recognize that the current conventional wisdom for those disrupters is to stay private. Which means that with just a minuscule number of exceptions, their investors will be crying for them to be acquired. Why would a company invest in the uncertainty of R&D and other innovative organic options when there are hundred of billions of dollars of dead money tied up in groundbreaking companies, all looking for liquidity? In this age of stay private, it makes no sense to build when you can buy.
      1. When you buy, you not only have far greater value certainty vs R&D, but you also eliminate a competitor. And you may get the additional benefit of paying for the entire investment through job cuts
    3. It is undeniably destructive to our economy and future when many of our most innovative and exciting companies are bought by their competition.  It is a “Precognitive Anti-Trust Violation” I know that sounds laughable in so many ways. But at its heart, it’s true. It’s also incredibly destructive to our standing in the world and our economy.
  5. Some may say that this is all wrong because  there isn’t a market for IPOs. There will never be a world where 300 companies go public. They will point to  January of 2016 , which had no IPOs, as proof of just how impossible an IPO market revitalization will be. I will tell you that the lack of IPOs is more a reflection of the intent of today’s entrepreneurs.This market is DYING for growth companies.  There are so few growth stories that companies with $250 BILLION market caps are looked at as growth companies. If Entrepreneurs made going public a goal again and had their IPOs while they were in an accelerating growth period rather than 10 years into their business cycle and only when their investors demanded it, I know I would be all over buying their IPOs and so would other investors.  
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