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Companies or at least their owners, need to realize going public shouldnt always be the goal. For the right kind of company going public is great, for the wrong kind it can mean the death of the company.
I've seen trying to go public, and the expense and compromises that go with it, cost way too many promising company's their future.
@freemo Agreed.
And more importantly, owners need to understand that a business that turns a stable profit while providing reliable jobs is not a bad thing. Endless growth doesn't always need to be the overarching goal.
@LouisIngenthron Yup, and public doesnt mean more growth either, sometimes it can mean less... private companies can and are as large as public ones
@LouisIngenthron yea but the owners dont get to dictate day to day operations. The board and people running the companyare not the faceless owners
@freemo Right, but if the stock price doesn't go up, the shareholders can, and often do, vote no-confidence to replace the board, right? I'm not familiar with the specifics of that, but I understood it to be a common remedy for not profiting.
And there are SEC regulation that it is the obligation of the board and management to maximize shareholder value (yes, it is quite vague), which tend to be argued to be "in the short term".
As someone who has been a board member, C-level, and owner is multiple companies, including most recently one that was effectively public, I can say this isnt really true.
All board members have a duty to look out for the best interest of the company. There is no implied sense of short term over long term in a public company. In fact our company largely prioritized and looked at profits much the same way before and after the process
The issue with public companies is quite the opposite, you cant get away with shady shit as easily since you are under a much closer watchful eye.
@LouisIngenthron no you cant remove board members simply for under reporting. Removasl of a board member requires both the approval of the board and its share holders and is a very difficult process. To even propose it you must be "person of interest" meaning you must hold considerable shares to even propose it. People with significant shares are in it for the long term as you cant dump your shares without causing your share price to fall and get far less than market value. So generally they wont be able to have the support to be impeached over short term profits since all the people who have that power are locked in to the longer term profits.
By the way, we can speculate all we want. but when we look at the data we actually see quite the opposite. Private companies show more of a tendency to have peak and dip short term profit chases than public companies.
Attached is an image from analysis from 2014 that demonstrates this, we see the private company has higher short term profits but a much bigger rebound after the fact. This is typical, private companies are known to be more volatile, on average.
@freemo Sure, but the nature of faceless shareholders seems to incentivize companies to prioritize short-term growth at all times in an attempt to keep the stock price ticking up, whether or not that's what their business really needs.