Recent performance of Apple stock makes case for companies staying private

13 years ago

“Sure, public markets may be efficient on average. However, this should not allay the very real fears of specific companies. Ninety-five percent of a classroom might be getting the grades they deserve, but that’s little comfort to the two students whom the teacher fails because he doesn’t like them,” Brian Hamilton writes for ABC News. “The performance of Apple and Netflix over the last several years demonstrates that specific companies should be cautious about going public. Let’s look at the numbers.”

“Apple is the most profitable technology company in the world, and trails only two banks in China and a handful of energy or oil companies on Fortune’s Global 500 list of most profitable companies,” Hamilton writes. “With a whopping net profit margin of nearly 24 percent and an almost incredible yearly sales growth rate of 19 percent, the stock price has plummeted by nearly one third since April 16, 2012. Shares that were $580 a year ago are now $406[1]. Based upon true economic performance, does this make any sense?”

Hamilton writes, “Given the uncertainty of short-run pricing, can it be a surprise that the number of public companies has dwindled from more than 8,000 to 4,916 since 1997? … Most business owners who start their own companies do so because they’re convinced they can do it better – build a better product, offer a better service, operate a company more efficiently – than the competition. They expect strong performance to be rewarded and weak performance to be punished in an equitable way. The prospect of seeing their company’s net worth or shareholder value go down as Apple’s has gone would be unsettling for management, employees, lenders and other business partners. Who needs that kind of uncertainty?”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]