With so much buzz around the financial news’ water cooler about private, well-known companies like Facebook, Groupon, and Skype potentially going public, one would come to the radical assumption that “going public” is a sure thing, right?
Well, that would indeed be wrong. How presumptuous of you to think otherwise?!
Would it instead surprise you to know that going public could mean more harm than good? For many start-up companies, when it comes to the decision on whether to go public or not most choose the latter.
Consequently, economic indicators show that the IPO market has dwindled to record lows since 2000. Dealogic, a New York market analysis company, reported that out of the 196 companies applying for IPO status this year 98 have withdrawn- that is a 26 percent jump in withdrawals from the previous year. In fact, studies reveal that of all U.S. IPO filings, between 15-20 percent are later withdrawn; and these are the ones that get out of the IPO game before it begins. According to Yobie Benjamin of Ernst & Young, 7 of every 10 start-up companies fail before they even begin to reach their IPO. Once a company has officially gone public it’s only a matter of time before they face failure as well (statistically-speaking of course). Likewise, further evidence also shows that for startups the financial condition of the company post-IPO decline. (more…)