TDE2012: Public vs. private

The Deal's editor in chief was on hand for the The Deal Economy 2012's panel, "Upstairs, Downstairs: Private vs. Public Markets."

The roaring success of Facebook and Twitter raises new questions about the wisdom -- or lack of it -- of going public. Some companies have gone the private route, either through a buyout or by remaining private and using firms such as SecondMarket or Goldman, Sachs & Co. to trade their shares privately. On hand to discuss these topics were:

David A. Ethridge, Senior Vice President and Head of the Capital Markets Group, NYSE Euronext
Thomas R. Evans, President, CEO & Director, Bankrate
Deborah A. Farrington, Founder and General Partner, StarVest Partners
Barry Silbert, Founder and CEO, SecondMarket
Moderator: Robert Teitelman, Editor in Chief, The Deal LLC

In this session, Farrington praised SecondMarket opening up capital streams for in-between companies. Evans gave some tips on IPOs, and there was mention of where the IPO market is headed with differing viewpoints.

Teitelman first asked, "How does the development of a secondary market for companies to remain private affect the IPO process, venture investing and particularly the development of a thriving tech sector?"

Silbert thinks the IPO markets have been dying for the past 10 years, which Ethridge doesn't quite agree on. Silbert said, "Since the '80s or '90s, we've reversed from low caps being the majority of IPOs to the minority."

Farrington added, "The increase in liquidity is a great thing. Barry saw a terrific opportunity between venture investing and IPOing. I don't see it as a threat. It puts less pressure on VC to do a merger. It provides a bridge. The waiting time is too long to go public because you have to be so big. Ultimately, it may add to the supply of public companies going forward."

Evans, who took a company public in 1998 and just IPO'd Bankrate, also praised SecondMarket. He made the comment that most entrepreneurs he talks to still want to become public for the "liquidity and stature." Farrington jumped in to say that "there's a great divide between those wanting to go public and those that actually can." Evans agreed: "I'd like to play for the NY Rangers but.  ..." Ethridge retorted, "What I'm worried about is folks choosing to sell before even getting to the market."

Teitelman then asked Evans what life's like after IPO. Evans pointed out that "the eight months before you go public" is a strict process. You have to bake in all your metrics and test them -- don't count on the money from an IPO to create a better business model, get your trajectory in order.

What about Sarbanes-Oxley? asked Teitelman. Acknowledging Enron and WorldCom, Ethridge and Evans said it's a hindrance. Evans added, "It gives auditors too much power. There's an antagonistic relationship. We haven't had an issue but the time drain is significant."

And what about IPOs in 10 years? Silbert thinks there won't be public versus private; there will be different venues for different companies. Farrington made the comment that there will be billions traded in secondary markets and that the U.S. public markets will be vibrant and will be the best and highest resource of VC returns. Evans then added, "They will both exist but with more transparency." Ethridge talked about the globalizing of markets, making sure to mention Deutsche Borse.