When startups cannot clearly describe their upside to the public prior to an IPO, they revert to new accounting methods to describe their often financially challenged downside. Acsoi anyone?
The real issue, of course, is that by pushing highly temporal value through the IPO process we play Russian roulette with the trust of the public. And the socio-economic value of these “pump-and-dump” schemes is often hard to comprehend for those who are not specialists and thus hard for the general public to buy into. And when the public does not understand the value of the company (perhaps because a healthy balance sheet is not there yet), why not stay private and let the PE overhang take care of making the promise of upside become a reality first?
Because we are going to need the public’s trust to build new value they, of all people, will need to buy into.
[Links: The New York Times Dealbook]
