Comment by nickff
11 hours ago
I agree that would be preferable if reporting were less expensive and (legally) risky, and what you're describing is definitely closer to the original intent of the rule (that of giving investors the information available to management), but it would make being a public company even more burdensome than it already is, and the number of public corporations is already in decline.
> it would make being a public company even more burdensome than it already is
Every company doesn't have to be public. The US taxpayer underwrites US securities markets, and companies that trade on our public markets have access to some of the deepest pools of low-cost liquidity in the world. But companies are obviously free to list elsewhere.
> the number of public corporations is already in decline.
Separate problem. IIRC HBS studied this and basically the issue is we stopped enforcing our anti-competition laws a while back[1]. So we end up with a fraction of firms that each sector would financially support. Both because it creates giants that are much harder to compete against, and because it allows mergers between competing firms that AFAIK could be deemed illegal under existing laws.
1 - See, for example the Robinson-Patman Act, whose dormancy allows big box retailers to exist. This law has never been repealed.
When companies stay private longer, private capital stays tied up for longer, decreasing public liquidity and keeping bad private investments afloat for longer. Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees. Right now badly performing companies can limp along tying up liquidity and locking up employee equity only to head to an eventual bankruptcy or bad IPO.
> Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees.
That's not how I remember it. I remember lots of publicly traded company shares being gobbled even though their business plans[1] were essentially:
1. Collect underpants
2. ?
3. Profit
"Going for marketshare" and not making a profit was still popular as recently as Uber/DoorDash/etc. Cisco still (AIUI) hasn't reached back to is DotCom peak.
Are the current multiples of many tech stocks sensible?
[1] https://en.wikipedia.org/wiki/Gnomes_(South_Park)
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> badly performing companies can limp along tying up liquidity and locking up employee equity
"Just raised a Series E/F/G/H/I" companies
how much of that decline is due to mergers vs failing vs new private companies being formed instead?