IPOS - All That Glitters Is Not Gold: Three Reasons Why an IPO Is Not The Best Strategy For Your Startup | Benzinga
For a long time, going public has been a "badge of honor” for numerous startup founders, and a synonym of prestige and validation in most innovation ecosystems. This stands true, even if M&A exits have gradually become more appealing and occur more frequently than public listings.
Since the beginning of 2022, the IPO market has slowed down, due to a variety of factors including rising interest rates and ongoing concerns of a recession. Yet, it is a more recent development that has the potential to prompt founders to reassess their priorities, and posit a much-needed question—Are public equity offerings still worth it?
You might have heard the latest about Elon Musk’s $56 billion pay package, and how, after a lawsuit filed by a Tesla shareholder, was recently voided by a judge. Given Musk’s public profile and status as one of the icons of Silicon Valley and beyond, this news made me wonder whether founders will now think twice before aiming for an IPO, and consider the financial and regulatory consequences and responsibilities that this comes with. Here are three reasons why, from my perspective, an IPO may not be worth it.
Three arguments against an IPO
#1: Trading restrictions
A common constraint entrepreneurs are likely to face after an IPO is the lockup period. During this timeframe, corporate insiders, investors, or employees are prohibited from selling or redeeming their shares.
The length of this ...