SydLexia.com - The Forums :: View topic - Publicly traded companies vs. privately held ones

Posted: Mar 24 2009 07:40 am

I've noticed that privately held companies tend be smarter, better organized, and more responsible than publicly traded ones. Since publicly traded companies answer to shareholders, they focus on the short term. If the stock doesn't pay a strong dividend every quarter, shareholders cry like fucking babies and demand drastic action, action that offer hurts the company in the longterm. Private companies have the leisure of more longterm strategies because they don't have to answer to greedy myopic complete fucking idiots.

Here in MA, we have three major supermarkets: Shaws, Market Basket, and Stop & Shop. Of the three, Shaws, the public one, has the highest prices and the worst consumer reputation. When they were privately held in the early 90s, they were the most successful.

In short, shareholders are idiots and the stock market should be dissolved.

Posted: Mar 24 2009 08:04 am

The stock market is stupid anyway. Stock prices have almost NOTHING to do with how a stock is actually performing, it's just a popularity contest.

When Google went public they opened at like $2 and closed at about $380, despite the fact they didn't have a product, their service was free, and they (at the time) had no ad revenue.

Dividends aren't even as important as you think, either. Microsoft didn't pay its first dividends until I think over a decade after they went public.

Joined: Dec 06 2007 Location: Connecticut Posts: 11244

Syd,

This is such a gross generalization that it is ridiculous.

In your examples it works out to be true, but that doesn't mean that all publicly traded companies are run poorly. I would argue that Google, Microsoft, and Apple have all been successful as public companies.

I think that we generally only hear about large private companies because they are the successful ones, but most privately owned companies tank in the first 5 years. The reason why they seem so damn good is because they have been run by one or two generations of a family who has extremely good business sense. If all businesses were like this, we would most certainly not be in an economic crisis. But the truth is, it takes so many strokes of luck and genius to get to that point that it is a rare thing.

So in general, I guess you are right... most companies we see that are privately owned do very well... Just remember that the ones you don't see do exist and they fail harder than you could ever imagine.

Jeebus,

Dividends are important, they just aren't usually applicable until a company has solidified to a point where it has extra cash... this takes decades in some cases. They usually signify that a company is profitable and not going anywhere.

As far as why an IPO jumps up? Because who the fuck knows how much something is worth until people can pay a price for it. It is an auction set by the market. The market thought Google would be profitable and do well... it was a HUGE risk. For those who took it at the start, they made a shit ton of money. Google did end up being profitable and is now your king. Do not talk bad about the Great Google.

Posted: Mar 24 2009 09:34 am

Stop and Shop is actually owned by the Dutch conglomerate, Ahold. They own numerous grocery store chains in the U.S. The only reason I know that is because my father worked at another chain they bought up. Ahold is a publicly traded company. The chain that my father worked at was family owned and well respected in my state, but when the owner died and Ahold purchased it things went down hill big time. He actually retired because the company literally became unbearable for him to work for.

Joined: Dec 06 2007 Location: Connecticut Posts: 11244

I totally forgot that I used to own shares of Stop & Shop before they were bought out. I made like 400 bucks when they got bought.

Posted: Mar 24 2009 07:05 pm

Retarded new logo aside, Stop & Shop has actually managed to bounce back from the initial bad business decisions made by Ahold. They have gone from the brink of bankruptcy to a once-again well-respected supermarket chain. But the new logo is retarded. What the fuck is that? A dove taking a crap in a bowl?

Posted: Mar 24 2009 07:39 pm

Got an image?

Posted: Mar 24 2009 08:16 pm

Here: http://www.flickr.com/photos/mikeyboydotcom/2797494698/

This is their old logo, a lot more succinct: http://files.leagueathletics.com/Images/SponsorLogos/2046/4658_logo.jpg

UsaSatsui's Youtube Channel · Posted: Mar 24 2009 09:34 pm

I'm not gonna comment much on the stock market, since I don't believe Syd seriously thinks that sending our economic system back to Dark Ages levels is gonna happen. The problem is not with the market itself, it's the investors. At least in this country, investors demand returns way too quickly, and companies make poor decisions rushing to get the money back in their pockets. This isn't an issue elsewhere, mind...Japanese investors are a lot more patient (this is a reason Nintendo was able to take it's time into the US market. They initially failed far more often than American stockholders would put up with).

As for why a company would go public in the first place...money. A public company has a lot more cash to work with than a private one, and therefore can do a lot more.

Posted: Mar 24 2009 09:55 pm

Syd Lexia wrote:

Here: http://www.flickr.com/photos/mikeyboydotcom/2797494698/

This is their old logo, a lot more succinct: http://files.leagueathletics.com/Images/SponsorLogos/2046/4658_logo.jpg

Syd, you do realize the company that bought Stop and Shop is Adobe, right? I don't know why, but I do know no logo can look like that without Adobe owning it.

Posted: Mar 24 2009 10:44 pm

UsaSatsui wrote:

The problem is not with the market itself, it's the investors. At least in this country, investors demand returns way too quickly, and companies make poor decisions rushing to get the money back in their pockets. This isn't an issue elsewhere, mind...Japanese investors are a lot more patient (this is a reason Nintendo was able to take it's time into the US market. They initially failed far more often than American stockholders would put up with).

Yes.

Posted: Mar 25 2009 12:25 am

well, my division/company is closing and they're not publicly traded:

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSBNG31727520090324

granted, they are in a lucrative market (sub prime auto loans) and they been bleeding money for a while, so its not a huge surprise. for some reason, everyone at work was surprised and going crazy.