Beginning of the end for the stockmarket

[FunGate]

The fact that Elon Musk regrets Tesla ever becoming a public company has drawn attention to the fact that many startups no longer need to become public.

https://www.economist.com/finance-and-economics/2018/09/29/american-startups-have-less-need-to-list-on-the-stockmarket

"He has drawn fresh attention to some familiar grumbles about public markets. The number of listed firms in America is in long-term decline (see chart). Mr Musk’s beefs seem specific, but they are part of a general explanation for this trend. The red tape, the endless disclosures, the ceaseless spotlight—all have made the cost of being a public company too high. Yet that is not the real cause. The main reason why startups do not become public firms is that many of them no longer need to."

Firms can now privately raise hundreds of millions of dollars privately. Also, since most new startups are digital in nature, they just don't require as much backing. Software can be copied at almost zero cost.

Do you still see a place for IPO's?

[spiker777]

Well the stock market appears to be in one huge bubble, just like the crypto industry saw last year. It will eventually pop, taking the majority of the big companies down with it, it's just a matter of when this will happen. In any case, there will always be space for IPOs, just because the market might crash, doesn't mean they'll simply disappear, I mean look at ICOs, they're still everywhere.

[timerland]

I wonder if online crowdfunding with tokens could see some small businesses choosing to start off this way instead of holding IPOs.

I doubt that the stock exchanges would necessarily end any time soon, and even if stocks as the form of value within a company becomes an unpopular idea due to its high entrance requirements and so on, there will still be other similar platforms taking its place, such as tokens.

Obviously, raising funds privately would always be an alternative to a public sale. But I think that there will always be demand in terms of speculating on these companies, which obviously brings a ton of institutions its profits.

[BTMgoMoon]

Your instincts are very sharp, but you are not sure whether the market will continue to depreciate or recover. If US stocks continue to decline, it will immediately cause a global financial crisis.

[HeRetiK]

Firms can now privately raise hundreds of millions of dollars privately.

Because we've been in an incredible bull market for more than a decade, interest rates are close to nil, confidence is high and money is plenty.

Once the next bust cycle begins -- ie. the "beginning of the end for the stockmarket" -- even large scale investors will lick their wounds, leading to a decrease in private investment. Which in turn will many companies see requiring public investment again.

Also, since most new startups are digital in nature, they just don't require as much backing. Software can be copied at almost zero cost.

What modern startups can save in terms of infrastructure and distribution, they need to make up in terms of expertise. Software development ain't cheap. Scaling a business isn't either, even in the digital realm.

[ShadowBits]

The fact that Elon Musk regrets Tesla ever becoming a public company has drawn attention to the fact that many startups no longer need to become public.

https://www.economist.com/finance-and-economics/2018/09/29/american-startups-have-less-need-to-list-on-the-stockmarket

"He has drawn fresh attention to some familiar grumbles about public markets. The number of listed firms in America is in long-term decline (see chart). Mr Musk’s beefs seem specific, but they are part of a general explanation for this trend. The red tape, the endless disclosures, the ceaseless spotlight—all have made the cost of being a public company too high. Yet that is not the real cause. The main reason why startups do not become public firms is that many of them no longer need to."

Firms can now privately raise hundreds of millions of dollars privately. Also, since most new startups are digital in nature, they just don't require as much backing. Software can be copied at almost zero cost.

Do you still see a place for IPO's?

I don't think that it is. Probably just a simple way of gaining people to invest it but eventually will have a solution for all of that. We can't just see the falldown of a certain market that way.

[FunGate]

Firms can now privately raise hundreds of millions of dollars privately.

Because we've been in an incredible bull market for more than a decade, interest rates are close to nil, confidence is high and money is plenty.

Once the next bust cycle begins -- ie. the "beginning of the end for the stockmarket" -- even large scale investors will lick their wounds, leading to a decrease in private investment. Which in turn will many companies see requiring public investment again.

Also, since most new startups are digital in nature, they just don't require as much backing. Software can be copied at almost zero cost.

What modern startups can save in terms of infrastructure and distribution, they need to make up in terms of expertise. Software development ain't cheap. Scaling a business isn't either, even in the digital realm.

Many of those behind the startups are software developers willing to work for free until their vision becomes a reality, this sort of competence is becoming nearly mainstream, and AI will be a useful tool for the common man to create complex applications someday soon. As for the scalability, it depends on the business, but still only requires a handful of talented people instead of hundreds or thousands.

[The Sceptical Chymist]

The stock market isn't going to end anytime soon, believe me.  You'll notice that the chart in the article plotting the number of public companies vs. time has an enormous peak in the mid-90s (looks like 1995 to me), and that corresponds perfectly to the rise of the internet and all those silly companies going public which had no viable business plan and no hope of ever making money.  So I think that accounts for what looks like a downtrend.

In addition, that chart only goes back to 1975!  I'd love to see the same data going back to 1925 or so.

There may be inconveniences to being a public company, and the article mentioned that having to report financial data and needing to keep up with analysts' earnings estimates, but employees absolutely love public companies.  They get these really generous stock options grants which (I think) cost the company less to give as a bonus than cash would be.  CEOs and other executives have gotten extremely rich from owning their company's stock, and some of that has to do with the stock market speculators.  That wouldn't happen with private companies, or at least not as easily than if they were public. 

Interesting article, but I don't agree that the stock market is doomed.  We might be seeing a slowdown, but it's been around for a long, long time and it does serve many useful functions.  And I wonder how your 401(k) retirement account would allocate assets if corporations stop going public.  Think about that one.

[Julunguul]

The fact that Elon Musk regrets Tesla ever becoming a public company has drawn attention to the fact that many startups no longer need to become public.

https://www.economist.com/finance-and-economics/2018/09/29/american-startups-have-less-need-to-list-on-the-stockmarket

"He has drawn fresh attention to some familiar grumbles about public markets. The number of listed firms in America is in long-term decline (see chart). Mr Musk’s beefs seem specific, but they are part of a general explanation for this trend. The red tape, the endless disclosures, the ceaseless spotlight—all have made the cost of being a public company too high. Yet that is not the real cause. The main reason why startups do not become public firms is that many of them no longer need to."

Firms can now privately raise hundreds of millions of dollars privately. Also, since most new startups are digital in nature, they just don't require as much backing. Software can be copied at almost zero cost.

Do you still see a place for IPO's?

I still see an opportunity for the IPO, given that the global economic and financial situation is experiencing problems. however, what is regrettable is that the purpose of this IPO will only give new problems, not solve old problems

[bittraffic]

Its the start now I think NASDAQ even said that they are also trying to move to blockchain.

So the old market may be migrating to blockchain as well like going digital and those companies that is right now in stock market will have to tokenize. Maybe they can do swapping within their platform.  They may also have a look to make their token be utility or security.

[Hydrogen]

I cant see the article (hit my free limit).   

AFAIK many of Elon Musk's issues stem from big oil investors recognising the danger the electric car poses to long term oil stock holdings. To protect their pro big oil interests, they hired journalists to publish anti Elon Musk news stories and spam the public with a massive amount of anti Elon Musk media. They may even have paid tesla workers to sabotage tesla operations, engage in corporate espionage and publicly fabricate false news stories to slander tesla/space x/musk in an effort to kill tesla's stock price.

That's where many of Elon Musk's issues appear to stem from.

I think many of us also are prone towards over-estimating our productivity, while under-estimating the obstacles we face. Elon Musk may have been too optimistic with some of his projections. His expectations of robot based manufacture were too optimistic. As a result he painted himself into a bit of a corner in terms of production estimates for his new car.

[Jet Cash]

Stock markets are no longer used for startups or expansion. They are now used by the founders and initial investors to withraw their capital. Zero interest rates, and the removal of restrictions on share buybacks. mean that a company can borrow money to buy its own shares. This inflates the share price, and it loads the comany with debt, but it allows the directors to sell their shares and increase their personal wealth without consideration of the future of the comany. We are starting to see the company failures as a result of this, and it will lead to a massive drop in share prices as the fear sets in once investors realise the problem.

The greatest concern is the impact this will have on pensions in the future.

[Ericgreen]

The fact that Elon Musk regrets Tesla ever becoming a public company has drawn attention to the fact that many startups no longer need to become public.

https://www.economist.com/finance-and-economics/2018/09/29/american-startups-have-less-need-to-list-on-the-stockmarket

"He has drawn fresh attention to some familiar grumbles about public markets. The number of listed firms in America is in long-term decline (see chart). Mr Musk’s beefs seem specific, but they are part of a general explanation for this trend. The red tape, the endless disclosures, the ceaseless spotlight—all have made the cost of being a public company too high. Yet that is not the real cause. The main reason why startups do not become public firms is that many of them no longer need to."

Firms can now privately raise hundreds of millions of dollars privately. Also, since most new startups are digital in nature, they just don't require as much backing. Software can be copied at almost zero cost.

Do you still see a place for IPO's?

I think stock market is still a needed evil. Many companies go public because they need the funds and owners of those companies keep selling their shares whenever they want to cash out or they can get more or they can keep the same, in the end it is a way for you to cash out the shares you have on the company.

Now if you do not go public than you would need to sell your shares to someone directly which means they gain control and you need to try to find a fair price for it instead of letting the market decide on your price. All these considered going public is still in the best interest of the company owners.