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Top Ten Reasons Not to go Public

A reporter recently asked me about the downsides of a firm going public – why might it not be the best course of action for them?  Here are my "top ten":

 

  1. It is a major distraction from the business of serving customers and meeting customer needs.
  2. Leadership teams today have to ‘recruit’ the right kinds of shareholders – activity which has nothing to do with actual business wealth creation but everything to do with staying alive in the stock markets.
  3. Being publicly traded means you will tend to overpay your executives.
  4. Executive (particularly CEO) tenure will tend to shorten as public company pressures make any slip up intolerable.
  5. It depresses the interest in long term innovations that are good for the company.
  6. You need a whole bureaucracy to manage the relationships with the Street.
  7. You can’t dispose of assets or businesses which still generate cash without huge stock price hits, so you tend to stay in things far longer than you should.
  8. Great people with somewhat tarnished reputations would never be able to use their talents in a public company (I can give examples).
  9. It depresses flexibility because of the pressure to meet expectations.
  10. It is manifestly unrealistic – only 8% of companies from 2004-2009 were able to grow by 5% top line each year and only 4% of companies in the same period were able to grow bottom line during the same period, and yet the investing community looks for double digit growth???  (data from a study I recently conducted with Accenture)

Food for t hought, no?

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