

SecondMarket CEO: Forget Facebook, the IPO market is dying - bproper
http://venturebeat.com/2012/01/17/secondmarket-facebook-ipo-private-shares-barry-silbert/

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jpdoctor
FTA: > _“The IPO market is dying,” he said. “You see companies achieving
robust valuations on the private market but being treated poorly when they go
public.” (We’re looking at you, Groupon and Zynga.)_

It seems quaint, but there was a time that a company had to have 6 quarters of
serious revenue and 2 quarters of solid profits before they went public.

That was before the dumb money from 401k's entered the picture.

~~~
dman
I think that is an oversimplification. I dont see the average 401k investor
investing in IPO's so I dont see how you arrive at the conclusion that more
401k money equals to more companies going public.

~~~
jpdoctor
> _I dont see the average 401k investor investing in IPO's_

Nor, for that matter, do you see many investors at all getting pre-IPO shares.
Most of the small guys come in after the IPO.

The problem is that the 401k's go to funds, who are playing a big game of
averages. They buy the S&P +/- some delta. IPOs form the delta for some of the
funds. (And all of the money buying the S&P means that valuations in general
have gotten quite a bit higher over the timeframe of 401k's, which drives
post-IPO valuations, which drives pre-IPO valuations.)

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dman
Can you point me to any funds that invest immediately in the illiquid shares
of a recently listed company?

~~~
jpdoctor
Search SEC's EDGAR. You will find who the underwriters are selling the IPO
shares to.

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briggsbio
_“We started at the very top with these outliers like Facebook and Twitter,
but the aim is to work our way down to much less high profile companies.”_

I don't see how SecondMarket is going to fill the void left by FB, Groupon,
and Zynga with long-tail trades. But that doesn't mean I don't want to see
that happen.

But all I've heard is the headache caused by these types of trades on the
company. Sure, disproportionately on Facebook, but if I or one of my coworkers
posted and actually sold shares on SecondMarket from our little company, it
would be a major annoyance, and spark a lot of internal hand-wringing and
tension.

I see it difficult for SecondMarket to create a long-tail market in the
smaller, non-SV/NYC, non-consumer internet startups. I can't imagine them
doing trades in small middle America biopharma companies (such as we are).

What epxerience does anyone on HN have when SecondMarket trading started
happening with Founders/employees/investors at their companies? Was it
noticeable? What impacts on employee morale/focus/work did it have, if any? It
would drive me nuts if I was CEO and all the water cooler talk was about
employees selling shares/options/RSUs (if even possible to trade options/RSUs)
on Secondmarket and what they got out of it, etc. Seems like a horrible,
distracting idea at a small, <25 person company - not to mention the impacts
on your valuation/investor perception in future raises, other externalities.

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danmaz74
A stock market with much less leeway for financial speculation is something
that I really hope for, but the problem I see is liquidity. I guess that most
of the buyers on SecondMarket are looking forward to the IPO anyway, which was
only a question of time for Facebook, but is a much less sure event with the
smaller companies that would really benefit from this market.

I wish SecondMarket well, but the one it decided to pursue is a very difficult
path.

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bradleyjg
If true, it is bad news. The non-public markets are by and large only open to
'qualified investors', which in practice means those that are quite wealthy.

The single best investment strategy ever devised is diversification. The more
of the economy closed to the general public, the less they can diversify, and
the worse their risk adjusted returns.

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dman
Markets without broad transparent participation and non-existent regulation
will be prone to fraud and manipulation. The last couple of years have shown
us that even markets with broad participation and (under enforced) regulation
can be manipulated. I am waiting for the first few blowups and scandals to
happen to restore some balance in this trend of keeping things private for
longer.

~~~
jdthomas
Exactly! This feels like a "scam" to skirt the rules of the SEC.

> “The IPO market is dying,” he said. “You see companies achieving robust
> valuations on the private market but being treated poorly when they go
> public.” (We’re looking at you, Groupon and Zynga.)

Zynga and Groupon were "treated poorly" because their numbers showed that they
were NO WHERE NEAR as profitable as they wanted us to believe when they were
private (and secrete). I suspect Facebook, also has highly inflated valuation
in these "second markets" where information is scarce.

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wavephorm
This is a self-serving statement. You really don't hear anyone else repeating
this. What's wrong is that SecondMarket has to exist to fill a large liquidity
void between startups and public companies.

What I'd love to see is a public stock market akin to Toronto's Venture
Exchange, but specifically for technology companies. A mini-NASDAQ if you
will. If I could raise money in the public market I could skip VC's, brokers,
underwriters and all these middlemen between my company and potential
investors.

~~~
bproper
I think his point is that not every company can get to $1 billion valuation or
wait ten years before going public. Like you said, there is a big void to
fill, and one that could be very productive for the startup ecosystem.

Think of all the tech companies that can get to $150 M. in a couple of years
and still need sensible capital to grow before they are ready for the big
time.

