Tech Startups Feel an IPO Chill
wsj.com
wsj.com
Here's why I think this matters. Previously tech companies, Microsoft being the prime example, paid employee's a fair market wage but then gave options or restricted stock as well. The rising stock price acted as a sort of bonus to employee's.
With companies now spending more time private and getting more of their gains as private companies, what's happening is that private equity and vc companies are now capturing more of those gains that the public would.
Employee's are also the one's holding the bag here. With their lockout periods after going public they are the most exposed to busted IPO's.
One other worrying trend is that investment banks are no longer backstopping the IPO's they shop. If you remember the Facebook IPO, there was a lot of buying at the ipo price from the book runners to ensure that facebook didn't drop below that price. The last few tech ipo's had no such support and happily "broke", or traded below their initial offering price.
The vehicles are just different. One can certainly invest into a Fidelity or T. Rowe Price mutual fund that gobbles up those deals, with understanding of limited liquidity and opaque pricing being a risk.
There are also vehicles like GSV Capital, which hold securities of Palantir, Dropbox, etc. but are nevertheless publicly traded http://gsvcap.com/charts/
On employees getting screwed: I think Robert Solow had a great piece explaining why investors & business owners are capturing a larger share of corporate profits than employees. [1] Basically, regulation has become increasingly pro-corporation, anti-employee/union since Reagan, and this allows the investing class to capture a larger share of the economic "rent" profits created by regulation, much like land ownership regulation allows a landlord to extract rent from a tenant. Explained better here: https://news.ycombinator.com/item?id=10054735
[1] http://www.psmag.com/business-economics/the-future-of-work-w...
Sounds like a good deal for the company.
I'm perfectly willing to take less money for other reasons, but not in exchange for a lottery ticket.
This is not necessarily a "sign of wariness." The investors are just doing what reasonably sophisticated investors do: protecting against downside risk. As long as the companies they've invested in can get out to market, the investors really can't lose. The companies themselves and other shareholders lose.
> Dropbox received the $10 billion-valuation offer from BlackRock after just two days of investor meetings, said a person familiar with the fundraising.
The company and its valuation don't matter. The terms of the deal do. You can make enormous profits investing in bad companies if you negotiate great terms.
If BlackRock structured its investment well, which it almost certainly did, Dropbox could go public with a $5 billion valuation and BlackRock would still achieve the desired return.
As I wrote in a previous comment, it's kind of amusing that so many in Silicon Valley rail against Wall Street and "financial engineering" when the biggest "winners" of this tech boom are products of Wall Street and "financial engineering."[1]
A lot of people have an irrational hatred of high finance.
Different primarily as maxxxxx says: 'IPOs are mainly a vehicle to sell stocks to the public where the investors have pretty much extracted all likely gains already'
PLS god one more crash I need affordable house thx