The August edition of the Economist raises a very relevant question (http://www.economist.com/node/16843627?story_id=16843627) : whether the sun is finally setting on the public company (vs the private company)?
I started thinking about Skype’s recent announcement of going public and whether that is a good or a a bad move. Although, the offering is not significant, going public would force Skype to react to impatient investors and erratic street expectations. Skype’s core competency has been cutting edge technology innovation and exploring unprecedented business model that pioneered the destructive creation of domestic telecom industry. Would Skype continue to innovate when suddenly its goal will be more aligned towards the Street’s quarterly expectations? In skype’s case the problem is further exacerbated by Ebay’s 3 years long failed adoption of Skype that had slowed the rate of innovation. Now is the time for it to start exploring the next round of creative solutions with wireless technology and wireless carriers and for that it needs to be free of the Street’s shackles.
Economist in the same write-up points out how the most fashionable investment vehicles—leveraged buy-out firms, hedge funds and venture-capital funds—are spearheading the [private] revolution. “These firms are usually organised as partnerships, though some, such as the Blackstone Group, are also listed. Corporate raiders often raise money by creating funds in the form of partnerships. Their targets are often restructured as partnerships. This makes managers behave like owners rather than hired hands: they can lose money as well as making it and they have years to turn their companies around rather than answering to the stockmarket every quarter. Hedge funds can make money by buying companies and selling underperforming assets. Venture capitalists make money in the long term by lending their names and expertise to start-ups. Hedge funds and venture-capital firms also make money in their different ways by getting fund managers to behave more like partners, with “skin in the game”, as the modish phrase puts it.”
