I would prefer if companies would stay private much, much longer. The stock market is extremely irrational and believes almost every hype. Which makes a lot of IPOs overpriced in the first place.
Valuations that in hindsight end up being too optimistic aren't unique to public markets. WeWork didn't have to go public to be valued at $47 billion. In fact it was the act of trying to go public that brought the valuation back to reality.
valuations of private companies are even more volatile than for "public" companies. in the case of WeWork it seems to me it was more like a scam of investors who fell for it. I stopped wondering when I read that some of the buildings were owned by the WeWork founders and leased by WeWork.
The problem is that employees of these large private companies are working for somewhat below market wages in exchange for illiquid equity. If these companies stay private for a long time they either have to cash out equity or offer more cash compensation.
Edit: option tender offers are absolutely a thing but I don’t think I’ve ever heard of an RSU tender offer.
I think the issue is, that many don't even have a working business model and are despesrate to find one after they went public. Even though sometimes, there is simply no business model, no way to earn money with a service, no way to make a profit. And in such a situation a company should pay their employees in equity or take money from investors who essentially speculate for a good IPO to get their investment back.
I kind of wish the startups would direct-list on the stock market, and then the early employees have liquidity from the start. This doesn't stop the company raising more money if they're young, they can still issue shares.
I'm guessing that theres some downsides to this that I'm not seeing, anyone know?
Once a stock has at least 2,000 acredited shareholders or 500 unacredited shareholders (was 500 shareholders without regard to acreditation before the 2012 Jobs Act), SEC disclosure requirements apply the same as if had IPOd. Allowing/encouraging trading of the stock is going accelerate the time that that happens. Facebook aproaching the shareholder limit was one of the things that pushed them to IPO --- might as well raise some money if you have to prepare all the disclosures and follow all the accounting rules, anyway.
