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":
- It is a major distraction from the business of serving customers and meeting customer needs.
- 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.
- Being publicly traded means you will tend to overpay your executives.
- Executive (particularly CEO) tenure will tend to shorten as public company pressures make any slip up intolerable.
- It depresses the interest in long term innovations that are good for the company.
- You need a whole bureaucracy to manage the relationships with the Street.
- 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.
- Great people with somewhat tarnished reputations would never be able to use their talents in a public company (I can give examples).
- It depresses flexibility because of the pressure to meet expectations.
- 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?