When a Company goes IPO...

[Icemaster]

Hypothetically, say your employer goes IPO after years of growth by acquisition.

How does it benefit you, the rank and file employee who holds no grants or options from when it was private? Other than say a discounted stock purchase program?

I see where anyone with stock could benefit (or not if it tanks...), but that's maybe VP/Pres/C level and above. What does the average Joe have to gain from that happening? I've seen it touted as a 'benefit', 'sign we're a great company', 'we're growing up and joining the big leagues', etc...and I see absolutely no value.

Am I missing something? Is this really meaningful? Educate me please...

[DWBOX2000]

Expect a lot more compliance. Yes, the higher ups are the ones who typically benefit.

[masraum]

It's possible that you may get some stock, but what it's also going to do is mean that the bosses want the investors to be happy. That means increasing profit every year. At some point, that will mean keeping costs low which usually means layoffs unless you're in a bubble. As stated, it also means more paperwork, training for things like safety, compliance, workplace harrassment, etc.... Suddenly, the company has people nosing around, so they have to go through the motions. I'd say it's a pain in the rear unless you get a chunk of stock that then goes through the roof. Still, it's also not a reason to leave. It's just change which is inevitable.

[TheMentat]

Yup... probably more compliance, and more short-sighted decision making from the higher ups.

As a private company, the executives are typically the owners, and are focused on maximizing the long-term value of the company. When the executives answer to a group of external shareholders, they focus on keeping their job, which means maximizing short-term stock price - often to the detriment of longer-term prospects.

[MRM]

The main benefit to line employees when their company goes public is that it gives the company access to additional capital that allows more expansion, promotional opportunities, and puts the company on more solid financial footing, which makes the line positions more secure and might reduce the company's cost of borrowing, which might make room for more generous salaries or benefits. Look at it this way. Employees don't benefit directly when the employer has a good year and is more profitable either, (unless they have profit sharing) but they certainly benefit by having a financially sound employer. Same thing for an IPO. It should put the company in a more financially sound position and give room for expansion. It doesn't put direct dollars in any non-stockholder's pockets.

Also, if the company has a 401(k) plan, they'll probably start contributing company stock at a rate that's favorable compared to what you would buy on the open market.

[legion]

I was a Finance major in college. In studying public companies, I saw a lot of short-sighted decision making. I often saw companies do things like layoff too much staff or shut down profitable divisions to make one quarter's numbers, and as a result killed the possibility of future growth. (Lucent, anyone?)

In public companies, shareholder's and investors put pressure on management for short-term gains. As a result, management has a short-term focus and often makes decisions allowing them to cash out before the negatives are realized (this is the case with most mergers of big companies).

I very intentionally went to work for a privately held company. We make decisions for the long-term. Sometimes we intentionally lose money one year to guarantee 3 or 5 years of growth. For the past 25 years, analysts have been predicting that my employer will go public (as most of our competitors are). These analysts clearly do not understand the culture at our company or the reasons we remain privately held.

[Icemaster]

OK, thank you. There's a lot of 'might' 'could' and 'possibly' in here - pretty much everywhere I expected.

It's not, in itself, a reason to leave but it sure ain't a reason to stick around.

[jhynesrockmtn]

It depends on the company, management, etc. I was part of the audit team that took Costco public in the 80's. The CFO is still there, their decision making was long term, etc. Unless you have stock options or an employee program to purchase at a discount, there is no direct benefit. I've also been in the public companies where the CEO was watching his own portfolio and the stock price daily. Short sighted decisions made mostly based on how the quarterly growth in the stock price would be affected.

[fintstone]

Absent profit sharing (stock options, etc.), there are a couple potential benefits. 1) It may make the company more stable, 2) it may help the company expand which might provide additional opportunity (more privates in your army, the more corporals you need). Expansion might also provide opportunities in other geographic locations. The downside is that the current leadership may have strongly valued the current location where it is just dollars and cents decision for a corporation. Depending on the business, they could move headquarters/operations to another city/state/country.

[widebody911]

If you have to ask who benefits from your company doing an IPO, it isn't you.

[nota]

don't the banks/underwriters get about 1/2 of the IPO generated cash as a fee
for the limited amount of stock sold in the IPO at the IPO price ?

so the big gainers are the bank/underwriters
and the select few CORPs who are allowed to buy the stock at the set price
as individuals are locked out of that game

the whole thing looks like insider trading too me
both by the sellers and the buyers
or that game is fixed

[Craig T]

Originally Posted by MRM

The main benefit to line employees when their company goes public is that it gives the company access to additional capital that allows more expansion, promotional opportunities, and puts the company on more solid financial footing, which makes the line positions more secure and might reduce the company's cost of borrowing, which might make room for more generous salaries or benefits. Look at it this way. Employees don't benefit directly when the employer has a good year and is more profitable either, (unless they have profit sharing) but they certainly benefit by having a financially sound employer. Same thing for an IPO. It should put the company in a more financially sound position and give room for expansion. It doesn't put direct dollars in any non-stockholder's pockets.

Also, if the company has a 401(k) plan, they'll probably start contributing company stock at a rate that's favorable compared to what you would buy on the open market.

This^^^^

Most companies will "shelve" some stock to be used as options, restricted share bonuses for executives, and to cover discounted stock purchases for non-exempt employee qualified retirement plans (401k).

If you have faith in the company and it's growth potential, I highly become you allocate at least some of your pre-tax 401k withholdings to purchasing company stock at a discount. Just remember, like all stock investments, diversify. Do not put all your qualified withholdings into the company stock. Lot's of horror stories e.g. Gateway Computers, Conexant.

[hcoles]

Originally Posted by widebody911

If you have to ask who benefits from your company doing an IPO, it isn't you.

got a kick out of this, good one, so true

[SpyderMike]

Even the guys who should benefit can find a way to screw each other when it goes down. What a feeding frenzy. It can bring out the "best" in people.

I was a VP of Ops at one that went IPO and **** changed big time about 3 to 6 months later. Lots of people whacked (including yours truly) and restructuring. Leaving that place was the best thing that ever happened to me (the IPO was good to me too), but the company went downhill after that, are a small portion of what they once were, and were sold off.

[wdfifteen]

There might be some initial upside, but by going public the corp has thrown itself to the sharks. The private owner may have many motivations for running his company - pride in what they do, a real interest in the product produced, family pride (if it was a family-owned business), recognition of employee loyalty, etc. Stockholders don't give a rat's patoot about any of that, they just want return, and as fast as possible please. A well-run small to medium corporation is subject to attack by predatory hedge funds, greenmail, and corporate raiders. The company can be completely taken away from its previous owners and employees. Employees can be fired and the company moved to another part of the country or to another part of the world if the BOD decides it will benefit share holders.
Read "Glass Houses" and "Barbarians at the Gate" to get an idea of Milton Friedman's philosophy that the board of director's only responsibility is to its share holders and what it does to businesses.

[Icemaster]

Ya'll are confirming what I believed and a decision I made recently. The reason for the question - the company I just left went public recently and the IPO was touted as one of the reasons I should stick around by a number of folks, that argument dissipated quickly when I responded with "Cool, how many shares in my grant package?" End of conversation. I left a week before it rang the bell.

There were a number of hard factors in the decision to leave but the underlying theme to all was the unrelenting pressure to perform, financially, in advance of the IPO and to satisfy the owners (private equity firm) of 18 mos. This translated to a lot of stupid new austerity measures, stupid in the "penny wise, pound foolish" short term balance sheet approach. The company lost the feel of the cohesive startup and became another faceless machine with no soul.

What triggered my questioning was a lot of the social media postings by former co-workers reflecting how excited/happy/proud/whatever they were that their company went IPO. Made no sense to me and wanted to make sure there wasn't something I missed.

[SpyderMike]

your experience matches mine. After IPO, decisions like "hire 100 people to get product out so we can meet our targets for our bonuses" at the beginning of fourth quarter, then "layoff 100 people so that we don't have the expense" right around Christmas...after working them overtime through Thanksgiving. Stupid ****.

[legion]

Originally Posted by Icemaster

What triggered my questioning was a lot of the social media postings by former co-workers reflecting how excited/happy/proud/whatever they were that their company went IPO. Made no sense to me and wanted to make sure there wasn't something I missed.

They are drinking the Koolaid. Don't worry yourself with it too much. If they didn't get in on the stock before or during the IPO (not the public reselling afterwards), they probably won't gain anything. You can make good money by short-selling recent IPOs--the more over-hyped the better. (You may have to hold them for months though.)

[legion]

It used to take months or years for the hype to wear off after an IPO. (Netscape, anyone?) Now it seems to take days or weeks.

Snap’s stock has left a bunch of millennial investors under water | New York Post

If you’re underwater on Snap shares since the company went public, there’s a pretty good chance you’re a millennial.

The stock of Snapchat’s parent company has been on a roller-coaster ride since its market debut last week, surging more than 70 percent from the initial public offering price in the first two days of trading and plunging back down by a quarter since.

Some seasoned investors have been wary of the volatile, relatively high-priced stock of a company that has yet to report a profit. But novice investors said their deep affinity with the disappearing-message app prompted them to jump in.

[Icemaster]