I'm curious why some companies are so reluctant to go public, where other companies seemingly can't wait to do so. Especially when they seem to be in similar industries, circumstances etc...
Can someone who knows about this stuff explain the pros and cons of going public vs. staying private?
Becoming a publicly traded company creates HUGE administrative burdens. If a company is private, they can basically scribble their financial statements onto a napkin, and as long as they are paying the government what they should be in taxes, nobody gives a crap. The owners can pay themselves what they wish, they don't have to report anything, etc. However, the only money the owners can earn is what they pay themselves in salary and their share of any dividends.
When a company goes public, the owners can essentially "cash out" a piece of their ownership. Take facebook for example. The company is "worth" 50 billion and MZ owns about 25%, meaning that on paper he's worth about 12.5 billion. However, if tomorrow all of the Facebook servers crashed, and the company went up in flames, and there was no salvaging it, he wouldn't be worth anything more than what he has in the bank, which I am sure is less than 12.5 billion. If the company were to go public, MZ would be able to (after some sort of a lock-up period most likely) sell off a good portion of his ownership on the public markets, turning his "on paper" net worth into a tangible cash asset.
Obviously there are a lot more pros and cons with going public, but thats something good to talk about if you were to get the question.
Awesome, thanks! Can't believe I didn't think of the admin issues.
Although valuation for FB is at 50 billion and MZ is perceived to be worth 12.5 billion, we don't know exactly how much the company is worth right? We can predict that if MZ sells off his entire stake in FB at 25%, he would make 12.5 billion, but it can be worth less than that after it goes on the market correct? Also, when you say that MZ is selling his ownership on the market, is it considered selling shares? Hahah, sorry it's probably pretty ridiculous what I'm asking, but I asked this question a few days ago and received very few answers.
And one last question: Instead of having an IPO, couldn't MZ just sell some of his ownership to other people? I mean, they already have multiple people who have a stake in FB.
Would appreciate if someone could answer these questions.
bump...would appreciate an answer. thanks guys
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