
Tech Startups Feel an IPO Chill - pierrealexandre
http://www.wsj.com/articles/tech-startups-feel-an-ipo-chill-1445309822
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chollida1
> And as of Friday, at least 11 of 49 venture-capital-backed U.S. technology
> companies with IPOs since the start of 2014 traded below the per-share value
> where they last raised money as a private company, an analysis of stock-sale
> documents by The Wall Street Journal shows.

Here's why I think this matters. Previously tech companies, Microsoft being
the prime example, paid employee's a fair market wage but then gave options or
restricted stock as well. The rising stock price acted as a sort of bonus to
employee's.

With companies now spending more time private and getting more of their gains
as private companies, what's happening is that private equity and vc companies
are now capturing more of those gains that the public would.

Employee's are also the one's holding the bag here. With their lockout periods
after going public they are the most exposed to busted IPO's.

One other worrying trend is that investment banks are no longer backstopping
the IPO's they shop. If you remember the Facebook IPO, there was a lot of
buying at the ipo price from the book runners to ensure that facebook didn't
drop below that price. The last few tech ipo's had no such support and happily
"broke", or traded below their initial offering price.

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jghn
This is why I wouldn't take less money just Because Startup. If they want to
give me equity in some format, that's nice. I expect it to be worth $0 and if
that lack of faith makes me seem like a bad employee, so be it. If I wanted to
play the lottery I'd go buy some scratch tickets at the 7-11.

I'm perfectly willing to take less money for other reasons, but not in
exchange for a lottery ticket.

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dsugarman
paywall get around..
[https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&c...](https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB8QqQIwAGoVChMI_9KOzsnRyAIVCf0eCh1e0Qef&url=http%3A%2F%2Fwww.wsj.com%2Farticles%2Ftech-
startups-feel-an-ipo-chill-1445309822&usg=AFQjCNE4W4F0iiaAqqdoxkmU_y7YzW1WuQ)

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7Figures2Commas
> In a sign of wariness among pre-IPO investors, an analysis of funding rounds
> by law firm Fenwick & West LLP in March found that 30% of private companies
> valued at $1 billion or more promised a specified IPO price. In some cases,
> the companies agreed to give additional equity to investors if the IPO price
> wasn’t met.

This is not necessarily a "sign of wariness." The investors are just doing
what reasonably sophisticated investors do: protecting against downside risk.
As long as the companies they've invested in can get out to market, the
investors really can't lose. The companies themselves and other shareholders
lose.

> Dropbox received the $10 billion-valuation offer from BlackRock after just
> two days of investor meetings, said a person familiar with the fundraising.

The company and its valuation don't matter. The terms of the deal do. You can
make enormous profits investing in bad companies if you negotiate great terms.

If BlackRock structured its investment well, which it almost certainly did,
Dropbox could go public with a $5 billion valuation and BlackRock would still
achieve the desired return.

As I wrote in a previous comment, it's kind of amusing that so many in Silicon
Valley rail against Wall Street and "financial engineering" when the biggest
"winners" of this tech boom are products of Wall Street and "financial
engineering."[1]

[1]
[https://news.ycombinator.com/item?id=10403067](https://news.ycombinator.com/item?id=10403067)

~~~
wcummings
>it's kind of amusing that so many in Silicon Valley rail against Wall Street
and "financial engineering" when the biggest "winners" of this tech boom are
products of Wall Street and "financial engineering."

A lot of people have an irrational hatred of high finance.

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aaroninsf
BUBBLE WUT BUBBLE THIS TIME DIFFER–

Different primarily as maxxxxx says: 'IPOs are mainly a vehicle to sell stocks
to the public where the investors have pretty much extracted all likely gains
already'

PLS god one more crash I need affordable house thx

~~~
gmarx
Sadly a crash might not do it. Next big trend, Chinese rich people sneaking
money out of the country and into California real estate

~~~
7Figures2Commas
Next big trend? This has been happening for years.

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foolfoolz
with so many companies faltering after IPO, why do you as a an individual have
any reason to stay at a company past it's IPO? seems like the best thing you
can do for yourself is use the company's momentum of going public to ask for
more money in a new a job

~~~
sjg007
Partial vesting, and hope the price doesn't drop below your strike price. You
might also enjoy where you work! The opportunities etc.. Some companies are
long term companies.

