When evaluating D. Gardy's comments about some of the boards' posts having been hitting the nail on the head, it might be well to remember that there were posts such as the following (Burnell54 Yahoo):
Deck is stacked against a young company coming out with an IPO too soon or in volatile conditions
THE stock market is experiencing a bubble of intense expectations for Internet-based companies. Many market watchers are predicting a dramatic end to that upward spiral, so start-ups are hurrying for the IPO gate before the bubble bursts. For many companies, that's a mistake.
The best place for a well-funded start-up right now is in the private sector. The stock market's current bubble isn't an environment conducive to building a long-term, sustainable technology.
Today's valuations are based not on earnings, or even sales, but on the future value of market share. Investors are pressuring Internet technologists to go public, perhaps prematurely, to cash in before a possible market shakeout. Like a strong riptide, the market holds undercurrents of danger and risk to companies that jump too soon.
Trading volatility has increased dramatically with the advent of Internet day trading, where individuals with an online account and a modem can move in and out of stock purchases on a moment-to-moment basis.
That kind of market swing used to be confined to pork belly or orange juice futures, and certainly wasn't accessible to large numbers of relatively inexperienced individual traders. More than 90 percent of investors in commodity futures lose money.
Historically, a start-up had to demonstrate profitability before going public. You had to demonstrate that you were making money for several quarters before Wall Street would take an interest. Investor criteria then changed from looking to profits to looking at sales as measured by units shipped -- showing you were shipping product in volume, even if you weren't turning a profit.
How then do investors value Internet companies, when actual revenues are still tiny? Market share, as perhaps best demonstrated by the amazing success of unprofitable Amazon.com, has become the yardstick. What's counted are relationships, often just names and e-mail addresses, in some cases clickthroughs, the number of eyeballs that have touched the company's Web site.
There are precedents for these models: cellular phone companies have been valued on future revenues of customer accounts, and media properties on viewership. But it is clear that the valuation bar for product and services companies has been lowered.
So, what's the problem? Why shouldn't start-ups give in to venture investors, who once expected their money would be tied up for five to seven years but now expect to cash out in under three years? Why not take advantage of Wall Street's current Internet infatuation? With so much capital coming in, what could you lose? Your company.
A start-up often needs to mature within the shelter of a private holding before it can reach the smoother performance expected of publicly held companies. After an IPO, key personnel often decide to retire on their well-deserved return for their contributions, which leaves the company without the expertise to follow through on its early promises. Or competitors, still anticipating their big hit, may lure them away.
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