Editor’s note: Russ McGuire is the online director of Business Reform Magazine. Each issue of Business Reform features practical advice on operating successfully in business while glorifying God.
All Wall Street eyes are on Google. The hope is that Google will IPO – issue their Initial Public Offering of stock – and by doing so very successfully, reopen the technology IPO market and reinvigorate the entire stock market.
I don’t question whether or not a Google IPO would be successful. The company has all of the characteristics of a breakout technology IPO. I won’t even bother discussing whether a Google offering would reignite the markets, because it doesn’t really matter.
It would be stupid for Google to IPO.
When stock markets were first conceived, they were purely designed to meet two needs. For the company, a public stock offering was an additional potential source of capital. For investors, public markets provided liquidity and a relatively effective way of gauging the current value of their investment. In turn, these investor benefits also worked to the company’s favor – increasing the reach, improving the attractiveness, and reducing the risk of the investment offer.
However, for the past decade or so, technology IPOs have been about very different things. They have been ego-driven superstar events. They have been high return exit events for early (primarily venture capital) investors. And they have been a key component of employee compensation, recruiting, and retention.
The very fact that the market “needs” Google is a strong indicator that Google doesn’t need the market.
Given weak technology stock valuations, an IPO would offer a very unattractive cost of capital. Given the instability of the market, publicly traded Google stock serves as poor compensation for employees. And similarly, existing Google investors should be less than ecstatic about an IPO into this market as their best exit strategy.
All that’s left is the ego joyride – and trust me – the pains and burdens of a corporate lifetime as a regulated public company are not worth the instant of fun and fame offered by an IPO.
Today, Google has tremendous freedoms. They can manage their company in the way that makes most sense for Google. They can choose close, trusted advisors to serve on their board without facing charges of corruption and cronyism. They can choose whether or not to disclose financial information. And they can make decisions on a daily, weekly, and quarterly basis without worrying about how Wall Street will respond.
In short, they can focus on being the highly successful company that Google is, rather than focusing on being the over-regulated, stock-price-defined robot that many want them to become.
Russ McGuire is Online Director for Business Reform. Prior to joining Business
Reform, Mr. McGuire spent over twenty years in technology industries, performing various roles from writing mission critical software for the nuclear power and defense industries to developing core business strategies in the telecom industry. Mr. McGuire is currently focused on helping businesspeople apply God’s eternal truths to their real-world business challenges through Business Reform’s online services. He can be reached at [email protected].
