IPO vs Buyout thoughts
From an article on Semi stocks. Does reasoning apply to MRVC? Would the CEO be having similar thoughts with MRVC having a different view or visa versa?
"Going public is not a pleasant thing, in part because you have people like me telling you how to run your business," Scovel said. "People with engineering backgrounds have to ask, 'Is this what I had in mind when I started my business? I like designing chips, not running a public company.'"
In addition, the payoff to management from a buyout can come much faster than via an IPO. Securities regulations restrict the amount of stock certain insiders can sell. In any 90-day period, they may sell the greater of 1% of the company's outstanding shares or the company's average weekly trading volume over a four-week period, said Gibson, Dunn & Crutcher llp partner Kenneth Lamb.
So in some cases, Lamb said, he has seen a company that could get a higher valuation in the public markets sell out instead to quicken management's ability to cash in.
"The market may give you a higher valuation, but you're stuck with a six-month lockup, and even after that, you can only sell limited amounts of stock," Lamb said. "In some cases, these companies will get bought at a valuation of $400 million, even if the potential market cap is $700 million."
cnetinvestor.com |
