Yelp Helps Kill the IPO Market | Hacker News Reader

Yelp Helps Kill the IPO Market

pehub.com

64 pointscwan12 comments

Hmm, this sounds as if it's markets routing around (†) Sarbanes Oxley. Some of the recent PE deals that have been going through are larger than dot-com era IPOs.

† http://news.ycombinator.com/item?id=414520

That Grant-Thornton piece linked to in the article has an interesting perspective. For example:

"The market impact [to the advent of online brokerage firms], unforeseen as it may have been, was devastating. Stock spreads narrowed, and the economics to broker-dealers continued to erode"

In summary: Broker dealers were priced out and therefore no longer provide quality research and liquidity support for small stocks which include IPOs. Therefore, no IPOs.

The remedy? Bring back quotes in 1/8s so trading frictions can increase again and therefore, somehow, IPOs come back. Can we give their argument a fair shake somehow? It's not making sense to me.

Killing an IPO market its more a healthy sign than a bad one.

IPOs were always a way for the finantial institutions to take profit from naive market investors. Historically IPOS have very bad results in average, and in the case they do get good results, they dont get to the average one-guy online investor but to institutions.

Finantial institutions involved in the IPO proceedings (getting your company fit to be a public company) can get up to 10% of your company : they dont invest money at all, they only help your accounting be public and legalities.

Of course, IPOs are widely advertised because the more people pay, the more money these institutions win. Of course, the institutions that used to do these are the ones that are in a terrible shape from the economic crisis.

Benjamins Grahams "Intelligent investor" says IPOS are "for suckers" :). The book that was written many decades ago even mentions these same financial institutions used to consider IPOs an unethical business because too many unskilled investors hoped too much of such operations.

How does this help the VCs liquidate?; i.e. if the IPO market got killed in favor of such deals, wouldn't that discourage venture capitalists from making investments?

I thought the same thing ... perhaps they think the company is a sure-fire acquisition target that will still net them a good return.

Why would a VC care if later rounds of funding came from an IPO or through Private Financing, as long as they were able to liquidate.

What I think is cute, is that with Second Market, Sharespost, and others, we're seeing "collectives" or "partnerships" raise money from the private investors, and then purchase private stock.

For all intents and purposes, these private companies will now have thousands (or tens of thousands) of investors, as represented by a few very large partnerships.

Unlike Google, these private companies won't exceed the 500 investor limit, won't have to go public, will allow employees to liquidate - and the only organization that is hurt will be the SOX auditors who don't get a new public company to audit.

There's a link right on the same page to "Glasshouse files for IPO:" http://bit.ly/aR2G8R

http://www.pehub.com/62168/glasshouse-files-for-75-million-i...

How do the PE companies get their return without an IPO?

Small note:

Secondary investors such as Millennium Technology Ventures have plaid a role

Should be 'played a role'

'Venture capitalists, though their own success in the run-up to the dotcom boom obviated the need for companies to turn to the public market for massive financing rounds.' through?

it doesn't look like the person reason their own article twice or did any sort of editing :(

"it doesn't look like the person reason their own article twice or did any sort of editing :(" reason?

I agree with you, the article does seems to show a lack of proofreading.

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