Why Some Companies Are Better Off Staying Private

We seem to be living in a world where the goal of every company is to at some point, become publicly traded. We see this with many tech companies who have almost or zero revenue, but can make founders and venture capitalists massive sums of money on their initial investment. It makes sense if you are in when the company is private, but many people who buy the company when it becomes public, end up holding the bag. Despite me personally believing that we are in a type of venture capitalist shit stock bubble, I also think many companies are better off never going public in the first place.

If you are a legitimate company that is earning decent profits, the allure of going public is far less glamorous. You can choose to stay private and earn a share of the profits, while more importantly, making decisions that might be best for your company, but not best for the shareholders. Shareholders for the most part like predictable moves with predictable returns. Acting outside of the norm or making risky bets as a company that is publicly traded, you could actually end up sued for not acting in a fiduciary manner.

If the market climate changes suddenly, as a private company, you are more adapt to adjusting on the fly, rather than running things through multiple channels. In addition the steps that you take in order to outperform your competitor, can be done without divulging your secrets. Public companies have to report, private ones can, for the most part, do what they please. In the short term, private companies end up being much more competitive, albeit, potentially more risky if the wrong choice is made.

Not having to please shareholders is something that many companies take for granted once they go public. Profits sometimes even end up dropping because the public doesnt always know what is the right move for a company, especially if they have people on the board who are bad actors. On the flip side, sometimes companies that are bought out, or go public and have a large amount of shares accumulated by a single person or firm, become more profitable, but it is much rarer. For example Buffet is known for cleaning house and making a company more profitable, but he is a rarity.

Overall I would say next time looking into publicly traded companies, see if you are really getting what you think you are when you purchase a share. Look at the past of the stock and see if there was really a reason to go public, other than the obvious one of making money for early investors. If not, you might want to examine what you know about the company as a whole and see if it would have been better off if they had just stayed private.

-Calaber24p