Apr 2, 2012|
Dan Primack from Fortune Magazine discusses IPO's.
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Got a great text question here June yeah 781 -- -- read tea. Amid a 403 B plans and I've been a 100% in the fidelity growth company fund FDGRX. It's up 21% year to date. Should I move my money to the sidelines and take the 21%. I can't add any more money to the plan -- and no longer worked for the state. Which should idea and it really it. The question isn't should I get my money out of the fidelity growth fund the question is should I stay fully invested in the stock market disease up 21% because he's doing okay yeah what he's doing great preview if he said to somebody and January 1 I -- like to make 21% on your money. And they'd say oh yes sign me up right. The fact the matter is he takes a -- and and you you get to -- out a fund a mutual fund like the fidelity growth fund. They're -- own a lot of shares of apple that's gonna probably there are just holding. Of stock will be within that fund. And so you know they I think what the question is should it is really should I stay invested in stocks. Despite the fact that they've rallied tremendously. And -- comes back to. An old question about asset allocation in OT EU should you stay all the stock market well yes in in hit in retrospect. You always want to be fully invested in stocks whenever they're going up right. But when they go down that's when you wanna be out of stocks that's called timing the market. And I find that to be very difficult when I tend to do. Is I try to figure out okay how much risk can we take with this port -- unity you're looking at an investment portfolio and you're you're talking to somebody and they say well. In all 45 years old and it's my retirement money. -- -- your 45 years old injury tire money. That -- can't really spend it. For at least another fifteen years and you're probably not gonna spend your retirement money to you turn what 6667. With Napster you're you're in your -- it of that age group right here in the younger youth group. And and that would be -- and where you'd look at things like look I can't spend the Q you can't spend your IRA money and T get out to be it sixty years so why would I will -- right now. I know some people have to but. You gotta say it short of an emergency right and I never gonna tap your hiring money until you turn 656667. In my case like I have to work until 67 to get my full you know be marketed until you're 77 you may sell out its -- rob said to me on Friday said you -- -- I'd like the workweek you know -- is -- what's what's the market closed on Friday -- am I supposed to do to try. -- hey you're on an island all by yourself. Among big guy on Monday at -- -- And it was Sunday nights actually get a little bit of a head start as I can watch the Asian markets open. But he did it's are 78 once question and not trying to be invasive that it really -- -- everybody's situation is different Eric if you're 45 years old you stay in it for the long run -- yet. You buy stocks this this is what I would rank in I'm 45 years old. I would buy stocks and could be remain long in the market because I believe that over an extended period time 101520 years. That the stock market is going to outperform. The bond market. Eager to be genius figured out I mean -- reported earlier ten year treasury notes -- two point 18%. Right so if if you're only gonna make. 2% on your money. For the next ten years. And I I I would be more inclined to be buying stocks but. There's a lot of people by -- Treasures to sell eyes are stocks -- stayed in for the long term star's real stake those stained for the long term that's basically the message that you're sending out to us that the Barry Armstrong investment philosophy I like it. Our. Let's talk about initial public offerings our next guest is in pretty Mac from fortune magazine. Dan welcome to the show are you don't. Know hey how many IPOs that we had in the first quarter 2012. In the first quarter we had 48 IPOs and these are companies -- pricing in the United States so obviously there's some in China and elsewhere but 48 in the US. What do not a which were pathetic young company's so called venture capital backed. There right now do you remember the 1990s when we would see fifteen to twenty IPOs in a week. Without a doubt a lot of the companies obviously didn't last very long bio one they were gone. Right now it. -- so why what's leading to the search an initial public offering active because it's higher than it's been the last few years right. Where it is what part of it is actually -- -- from 2002001. You know after that after something that companies went bad. It was very very hard to get companies public so if you began accompanies they'd go to -- -- Normally under normal circumstances you would've gone public are ready to -- 70008. The company were really able to -- now they're starting to finally come out. And you've also of course just broader -- that equity bull market you know stocks generally doing well when stocks are going up people are more likely to Biden's stock. And ending the -- -- They're raising the money any any Massachusetts companies have gone public this year. I gap so far there was five of them that went public in the first quarter are the biggest of which was that Cambridge based. Cancer drug company called Merrimack pharmaceuticals. But other names Brightcove which does kind of video online video advertising few others. Now Dan if you if you take your company public senior officer of the company say the president to the founder of the company. Are you required to hold on to the shares that you have in the company York and you dump them on the day the IPO. Legally you would be allowed to dump them on the day the IPO but you wouldn't wanna do it you know -- if prospective investors are looking and say oh look. The CEO of the company planning to sell all of his -- -- day the IPO you probably don't want to bite you you know you want some alignment of interests and get in the game usually is the executive and -- investors. Existing investors sell some shares but usually it's it's a very small percentage. Once the offering is public. Use it as a so called lock up period so decorative -- Self respect ninety days -- 180 days after the offered to you don't risk by and that happens dump. Good idea okay well what about FaceBook when they go on public. Our early may possibly late April early may that all indications in the -- there's some sort of SEC delay you know when we look at for example and had some of these other companies. There have been things the FCC has had questions about about the registration documents which -- pushed things back a few weeks. We -- indicates that the case -- -- but you know we're probably talking for weeks from now are we. And and how much is the company valued at now. On the private market value over a hundred billion dollars you know as a last Checketts said they wanted to raise five billion in the IPO all that could change. We're almost certainly looking at an initial public offering value is acceptable under now. And they don't under don't get it if they don't need the money either right they're just doing it. To create liquidity -- SA and I really never understood why they're going public as they don't need to cash. The day you're right they don't need the cash I guess it's really it's really liquidity issue and mainly for employees there's something out there called the 500 shareholder rule change in. What that basically meant is if you have 500 or more shareholders which FaceBook now does. You have to start providing certain financial disclosures to the FCC which is almost the equivalent of going public you go through all the effort we don't get any benefit. For FaceBook -- one of the things they did that prevent them from getting the 500 what they've started -- what they called restricted stock units to employees which basically. We're kind of like stop except employees couldn't really trade them and they could only get value for them if the company went public or it got -- well. You've got a lot of employees who would like to -- -- out too would like to buy a car so you got all these are unit which -- you were millions of dollars but until they go public there were not -- so. You could argue this is kind of FaceBook trying to prevent an internal revolution. Revolution. And right now there are the rules regarding initial public offerings are they being relaxed I think and -- is gonna be easier to go public. Yep particularly if you're a small company out from the public jobs that popped -- out -- we -- already passed the senate and President Obama is expected to sign it this week. This is really gonna focus in terms of IPOs are companies that have less than fifteen million dollars in annual revenue. What it means for those companies is for the first couple years there of light as a public company. They'll be required to provide fewer financial disclosures. And which basically makes it a little cheaper to go public a common complaint the a lot of small companies has been the regulations kind of stemming from Enron actually -- sarbanes Oxley. It made it prohibitively expensive for them to go public. This will relax that -- it also. Will allow banks. Provide research on new companies even if they're participating in the IPO that's something that -- -- -- -- tried to stop. And what that basically means I was there will be companies will be able to get analysts which means they should have an easier time getting -- All right well Dan great job on the article and appreciate your time in the explanation of the initial public offerings thank you thank you backed our -- three Mac fortune magazine.