Notes From the Fieldby Martin Weil

December 3, 2014

IPOs, Who Are They Good For?

If your model of the stock market is that companies that are building businesses come to the stock market to finance those businesses, your model is wrong. The stock market is where companies that have built businesses go to cash out their shareholders.

The always astute Jason Zweig on why companies really go public. As he says, it is not to raise money to operate, they have already done that by raising private capital. It is to create a market to facilitate insiders and early private investors cashing out their shares by selling into a broader and deeper public market. See this example on Bloomberg about the current financing of Uber.

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