Yes, I realize that’s a contradiction, but it seems to capture the essence of deals such as Goldman’s investment in Facebook at a $50B valuation and Groupon’s half-complete $950 million fundraising effort. These deals are designed to provide significant liquidity for insiders (especially early investors and employees), provide a piggy bank for continued aggressive growth and establish a share price for use in acquisitions. Those are all the things that companies traditionally got from an IPO. […] These deals should really be a wake-up call to politicians and regulators. They are a great example of how well-intentioned regulations can backfire. The net result of the Wall Street research settlement, SARBOX and other protections for small investors has been: small investors now have no access to the most interesting investment opportunities. Instead, these companies are going to be more or less fully developed by the time they eventually come to the public markets, with most of the upside having been captured by private investors. That’s especially annoying when it seems that with the Internet we should be seeing IPO 2.0 — direct to small investors without the historic flip opportunity for well connected investors.
03 January 2011
1 min read