Wednesday, August 05, 2009
The closing of the public markets
Frank Quattrone, who ought to know, explains why it is more difficult for a tech company to go public than it has been for twenty-five years.
One reason is the heightened bar for small companies to go public, Mr. Quattrone said. Throughout his career, he said, some of the greatest companies he was associated with had $30 million to $50 million in revenue when they went public. Today, he said, bankers require companies to have $100 million or even $200 million in revenue.
I think Quattrone's explanation, at least as published in the interview, does not get to the root cause, which is that the Securities and Exchange Commission, more "entrepreneurial" prosecutors such as Eliot Spitzer, and ignorant morons in Congress simply took umbrage at early stage companies -- think the "dot com" bubble -- using the public markets to raise what was essentially venture capital. They imagined widows and orphans investing in empty shell companies that sold snake oil over a web site (never mind that the vast majority of all the money in the market is laundered through professional money managers). So they shut it down in a thousand different ways, with the result being that it is far more costly for a company to go and remain public than it was a decade ago, and far less attractive to be a public company executive than it was.
We are killing the goose that laid the golden egg by slow poisoning. I fear we will not reach for the antidote until it is too late.
CWICD: Paul Kedrosky.
4 Comments:
By 
Georg Felis, at
Thu Aug 06, 10:21:00 AM:
Even NPR Businesses learn to make do with fewer workers does not understand yet.
So what we have is companies who are being strangled for startup cash due to regulations, slugged with additional payroll expenses by way of mandatory health insurance expenditures and carbon taxes, hobbled by the card check provision allowing Unions to steamroll their employees into membership, and any profits they make are going to be confiscated in order to pay the massive spending programs coming out of Washington.
Gee, I don’t see why they are not lining up to add employees.
/sarc
When even NPR realizes what is going on, then we will have some real change. I hope.
By Andrewdb, at
Thu Aug 06, 12:33:00 PM:
I remember when "easing access to the capital markets" was all the rage. Needless to say, that pendulum has swung to the other extreme.
By 
, at
Thu Aug 06, 04:49:00 PM:
Why would you quote a criminal on your blog?
By TigerHawk, at
Fri Aug 07, 12:15:00 AM:
The case against Quattrone was dropped. That does not mean he is innocent, but it definitely means there is an open question. But even if he were a criminal, that does not mean he is neither expert in the subject at hand nor correct.
Put differently, I would not have a problem quoting Michael Milken either, at least if the subject were, say, the development of the original issuance high yield debt market.
