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Technology Stocks : Game Changers and Market Movers

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From: Paul H. Christiansen	11/29/2014 11:28:09 AM
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What Companies Give Up Staying Private This year has been full of evidence technology companies are in no rush to go public, the latest of which is the news that Uber is on track to raise around $1 billion at a valuation approaching $40 billion—more than 1.5 times the public market value of Twitter. I suspect that 2015 will bring more of the same and force the industry to reckon with issues we haven’t fully contemplated around massive, private tech companies. Some of those issues will relate to the ongoing discussion around investor value creation; it’s no secret private market investors are capturing relatively more of the tech sector’s growth than public investors, although that may be somewhat muted by the fact that some historically public market investors like Fidelity and T. Rowe Price are often now investing in private rounds. But there are other potential consequences of being in no rush to go public that companies like Uber, Airbnb, Dropbox, Palantir, SpaceX and others should contemplate. By the time they end up going public, their days of rapid growth may be behind them. Once that reality dawns on investors, their stocks are likely to trade accordingly. In that scenario, how will they adjust to life as slower-growth public companies? It’s worth remembering how handsomely public market investors have rewarded fast-growing tech companies and what they’ve accrued in return. Amazon’s market capitalization has grown around 300-fold since it went public in 1997. For Facebook to have the same run-up, the company would have to be worth around $25 trillion by 2029. Investors will adjust. The smart ones will find ways to get in early and to get in on the IPO, where a decent pop on the opening day will still be possible even for a more mature company. The complete The Information article is available only with subscription . . . What Companies Give Up Staying Private

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