Don't Buy the Present by Paying With Your Future
Why big public companies rarely create new markets
Where shareholders reign, customers suffer.
The stock market can make a company big and its founders wealthy. However, it can destroy a business, too.
So, going public isn’t always a great idea.
Companies that changed their minds
In 2013, Michael Dell and Silver Lake Partners took Dell Technologies private through a buyout valued at approximately $24.4 billion. Dell later returned to public trading in 2018.
3G Capital took Burger King private in 2010 for $3.3 billion.
In 2015, BC Partners acquired PetSmart, then a public company, for $8.7 billion.
Seagate Technology went private in 2000 through a management buyout valued at $2 billion.
In December 2024, Nordstrom agreed to go private in a $6.25 billion deal backed by its founding family and Mexican retailer El Puerto de Liverpool.
In October 2024, TechCrunch reported: “There were 136 take-private deals… in 2023, up 15% on the previous year. New data indicates that by the midway point of 2024, there had been 97 such deals, meaning we’re roughly on course to match last year’s figure.”
On January 6, 2025, The Wall Street Journal subtitled its article on Boeing: "Restore trust and forget the stock price: Experts from inside and outside the company share advice for the troubled jet maker."
Many startups dream of going public. But some then crave going private again. What drives them to do so?
Creative conflict
The most effective forms of cooperation are born from contradictions. In business, it is a conflict between the interests of entrepreneurs and their customers.
Entrepreneurs want to make profits. Customers want to buy cheaply.
A true entrepreneur will never miss the chance to sell for $2 what they usually sell for $1.
However, a true entrepreneur can also postpone making profits to achieve greater profits in the future.
Elon Musk bought Tesla shares in 2004, four years before it started producing its first roadster.
Amazon used to be loss-making, and so was Uber.
But an IPO changes the roster of shareholders, putting professional investors in the main seats. And the only thing they pay attention to is the stock price.
Two factors drive stock price: the prospect of fast growth and profitability.
Professional investors can tolerate losses until the business grows, which pushes the stock price higher. That’s why they backed Amazon, Dropbox, Tesla, Facebook, Google, and many other ventures for years until they turned profitable.
But as soon as the share price stagnates, they get nervous and try to influence the situation. For instance, in 2025, Carl Icahn didn’t let Blockbuster defeat Netflix with his attempts to quickly drive the stock price up.
If the CEO’s name isn’t Steve Jobs or Elon Musk, investors are unlikely to trust their promises to earn big money in the future. They want profits here and now.
A CEO of a big public company works for the shareholders, not for customers. The shareholders may call them or even fire them, while customers are just some guys on a slide in the corporate presentation.
That’s why many CEOs do their best to increase the stock price. Quite often they buy the present by paying with the business’s future, as it happened with Boeing.
To create a new market or revolutionize your industry, you must be ready for failures, losses, and significant risks.
Creating a new market while constantly thinking about stock prices is like expecting to always win at a casino.
Failure is the constant companion of innovation.
That’s why some companies prefer to stay private or to go private for a while. They need a free hand to conduct massive transformations without the pressure of pleasing shareholders every single quarter.
Conclusion
If you want to create a new market, don’t rush into burdening yourself with new responsibilities to shareholders.
Sure, an IPO can provide you with the capital, but capital always comes with extra strings attached.
If you want to ignite a new market, it's worth starting a separate company.
In 2025, I’ll be talking a lot about the art of building new markets in this newsletter—stay tuned and check out my book Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism.
Do you need expert guidance to craft a winning strategy for your business? DM me.
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Read also: 5 Pitfalls of Data: Why You Should Bet on Intuition While Strategizing
Check out my other newsletters: Strategy in Three Minutes and Life Strategy.
Sincerely yours,
Svyatoslav Biryulin
Your insightful story deeply connected with me and reflected my four decades of observations in the corporate world. IBM was a prime example, where a visionary leader like Lou Gerstner championed a customer-focused leadership approach when the historical company was about to collapse. I was there and felt the pain created by the wrong strategy at the time. Your key message for leaders—to avoid compromising the future by indulging in present desires that could have detrimental effects—truly resonates with that experience. Thank you for writing this powerful message so clearly with excellent examples.
Balancing all the interests is challenging. What’s best for one group of stakeholders creates problems for others. Thanks for the article.