[boringg]

While that sounds like a great ... in all likelihood by the time it hits the public market most if not all the value will be extracted by the investors. With a branded company like this and equity markets as frothy as they are. I doubt there will be much value left for retail. Hopefully Im wrong though.

[franl]

I always hear this line of thinking, but there aren’t ever supporting examples presented. Stripe reminds me of Cloudflare. Cloudflare is over 5x what it was at IPO (as of 6/14/21). Maybe what you describe is the case “on average” for most IPOs, but it seems to not be the case for extraordinary companies like Cloudflare (and maybe Stripe). Obviously just an n of 1 but I’m sure others could chime in with similar examples.

[boringg]

There are numerous examples on both sides for sure. I would add that performance also does well for companies operating in a bull market.

In the case of cloudflare (And many tech stocks) they had a black swan event of a large portion of the global economy going online during the pandemic which has juiced their returns.

Not saying it doesn't happen but rather that it isn't how people typically price their IPOs to generate value to the retail investor.

[franl]

Yep, makes sense. A little nitpick: I wouldn’t call it a Black Swan because multiple people called out the potential for such a global event to happen (Gates, Taleb, etc.), but to your point it certainly further accelerated the move to online commerce, mainstream remote work, etc. Cloudflare and Stripe are/were both well positioned for that type of world.

[tshaddox]

Wouldn’t the idea be that the company would continue to create value after going public?

[boringg]

The idea of going public is to raise another round of financing for the company while being able to get liquidity for private shareholders. It is not necessarily to create value going forward.

The best option is for the company to raise a good deal from the public markets (high valuation on limited equity) and then execute successfully without needing to raise again. If they do need to raise again they have hopefully not done a poor job on their original public IPO so that they can go back to the public markets. That said it isn't that important a factor.

[tshaddox]

> The idea of going public is to raise another round of financing for the company while being able to get liquidity for private shareholders. It is not necessarily to create value going forward.

Perhaps the company doesn't necessarily intend to create value going forward, but they must at least pretend to have that intention. What I meant was that the idea of the people buying public stock in a company is that the company will create value going forward.

[gwright]

> It is not necessarily to create value going forward

Not sure where you are going with that thought. A business that isn't creating value is going out of business or selling to someone who has an idea of how to use its assets to create value.

[boringg]

Actually not all companies create value. Monopolies create profits through pricing distortions but not necessarily value. My point is that creating value is not a key component of a company going public.

In this current moment I would wager that if you are suggesting that you will create value in the market going forward you will get a great return on your investor dollars but you may not actually execute that value creation. (relevant news: lordstown motors)

[tshaddox]

Perhaps my original wording should have been "delivering value" rather than "creating value." Of course it's true that some things that companies do are at best shifting value around and at worst extracting or even stealing value from elsewhere. But my point was that people who buy public stock from a company almost certainly expect that company to somehow be more valuable in the future.