Newly public companies going private again

https://www.wsj.com/articles/going-private-again-is-all-the-rage-among-newly-public-companies-93fff45e

by mirthlessend • 3 years ago

30 24 3 years ago

mindwok• 3 years ago

This seems like a good trend to me. Do an IPO to satisfy all the early investors, then go private so you can focus on long term growth and avoid most of the horror of being a public company.

bushbaba• 3 years ago

With what money? If they had that money they could buy out most investors in the private market

PaywallBuster• 3 years ago

IPO at 1B, valuation drops to 200M after 1 year

Buy back shares at 1/5th of the price

psychlops5• 3 years ago

I'm not so sure. How does the average public investor benefit? I can see them losing money on the drop from the IPO, then locked out of future profits when the company goes private. Too cynical?

jakelazaroff2• 3 years ago

They can reject the motion to go private, can they not?

bkwhopper• 3 years ago

they benefit because it IPO'd at $20 and then went down to $10 so they are happy to get out at a premium price of $15. Instead of losing 50% on their original investment they are only losing 25%.

AlbertCory2• 3 years ago

Private equity isn't a new idea. "Leveraged buyout" is the old term for it. In the bad old days, the LBO company would issue tons of long-term debt, which the company would have to pay interest on. To be able to do that, they'd have to lay people off, close unprofitable businesses, and otherwise go on a starvation diet.

For these newer companies, the market cap probably isn't that high, so maybe the big bond issue doesn't happen.

Grill maker Weber Inc. WEBR ... agreed to go private last year for $8.05 a share, well below its $14 IPO price less than 18 months earlier.

So, they collected a lot of money at $14, then collected more at $8, and in a few years when finances are better, they'll IPO again at $14. Nice business, except for the people who paid them $14 at the first IPO.

cykros• 3 years ago

I'd be curious if Medium Term Notes have a role to play here, particularly considering the size. A lot of the term benefits of some bond issues, without a lot of the red tape of actually going through a bond issuance.

chrisgd• 3 years ago

Is it their fault they found someone willing to pay $14/share?

cs702• 3 years ago

...because they don't like their recent (i.e., much lower) share prices.

They go private by buying shares at a lower price than the price of the shares they sold in the IPO.

If execs think the IPO price was fair, it's a good deal to go private.

aluminussoma• 3 years ago

0% Interest Rate Phenomena. Much of the funds come from extra capital sloshing around the system, looking for returns. Once bought out, some companies incur more debt (easy because of 0% interest rates) much of which goes back to the new owners as special dividends. Finally, once stripped to the bones, the company goes public again.

I can't wait until this vulturous business model gets smacked in the face by tighter financial conditions.

psychlops5• 3 years ago

Nice insight and agree with the sentiment. Get comfortable as I don't think we will see higher interests for a while.

tbihl3• 3 years ago

The Fed target interest rate is 4.75% after being 0.25% since the beginning of 2020. The days of free money firehose are done for now.

Am I somehow thinking of the wrong rate here? Heck, my savings account gives 3.5%, like when I was growing up.

Newly public companies going private again

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