Issuing in stages

I apologise for this morning’s post on IPOs. It was one of those posts I’d thought up in my head a long time ago, and got down to writing only today, because of which I wasn’t able to get the flow in writing.

So after I’d written that, I started thinking – so if IPO managers turn out to be devious/incompetent, like LinkedIn’s bankers have, how can a company really trust them to raise the amount of money they want? What is the guarantee that the banker will price the company at the appropriate price?

One way of doing that is to get the views of a larger section of people before the IPO price is set. How would you achieve that? By having a little IPO. Let me explain.

You want to raise money for expansion, or whatever, but you don’t need all the money now. However, you are also concerned about dilution of your stake, so would like to price the IPO appropriately. So why don’t you take advantage of the fact that you don’t need all the money now, and do it in stages?

You do a small IPO up front, with the sole purpose of getting listed on the country’s big exchanges. After that the discovery of the value of your company will fall into the hands of a larger set of people – all the stock market participants. And now that the market’s willingness to pay is established, you can do a follow on offer in due course of time, and raise the money you want.

However, I don’t know any company that has followed this route, so I don’t know if there’s any flaw with this plan. I know that if you do a small IPO you can’t get the big bankers to carry you, but knowing that some big bankers don’t really take care of you (for whatever reason) it’s not unreasonable to ditch them and go with smaller guys.

What do you think of this plan?

The problem with “civil society” people

is that they can’t work with people with whom they have minor differences – which is where politicians easily trump them. Politicians are expert in the art of working out compromises and working with people with whom they have divergent beliefs. Of course, it creates “unholy coalitions” but you have to give it to the enterprise of the politicians (let’s not question their motivation here) to come together as a group and get stuff done.

With civil society types, however, as soon as they discover that there is something disagreeable about the other party, they’ll cry hoarse and refuse to work with them. So for example, if for some reason I come together with these “civil society” worthies for some cause, I’m sure they’ll all ditch me as soon as they come to know that I was a member of the RSS when I was eight years old.

Because of this, it is rare that civil society types come together for a cause, which is what makes people believe that the Anna Hazare-led protests of two weeks back were such a significant success. That this magnificent coalition hasn’t really lasted, and cracks are already coming up in the “civil society” half of the draft committee just goes to illustrate my point.

There can be exceptions to this of course – civil society people drawn from an extremely homogeneous distribution ARE capable of “getting things done”. Think National Advisory Council!