Peter Gleason

To be a public company or to be a private company—that is the question for an increasing number of directors of both private and public enterprises. And given the recent rise in public-to-private buyouts and private-to-public initial public offerings (IPOs), corporate directors need to be comfortable in both worlds.

Heading toward the public markets are our newest IPOs. As of May 10, 2018, according to statistics from Renaissance Capital, the United States has seen pricing of 67 IPOs worth over $50 million—up 28.8 percent from the same period last year. Last year 160 IPOs got to the pricing stage—up 52 percent from the previous year. As for filings, the first quarter of 2018 saw 44 of them in the United States valued at over $50 million; last year featured 140 such filings—both numbers up from the previous periods, signaling a recovery from the dismal market of ten years ago.

However, the number of publicly traded companies on the market has still not rebounded to the pre-dotcom bust levels. Many companies now see an advantage in going private, with major examples in recent times being Panera and Staples. In both of those cases, the move came amid concerns about short-term mindsets on Wall Street inhibiting the companies’ ability to create long-term value. Earlier this year, Univision, a one-time public company that went private in 2007 after a buyout deal, withdrew from an IPO citing “prevailing market conditions.”

There’s also some speculation that companies want to leave public markets because activist shareholders have spooked them. The 2017-2018 NACD Public Company Governance Survey shows that 16 percent of respondents serve on boards that have been approached by activists during the previous 12 months—down from the previous two years but still a level high enough to motivate meetings with shareholders, reported by half of all respondents and the highest level reported since 2015. A Fortune article written at the time of the Safeway and Dell buyouts observes that both companies decided to go private because of the specter of investor activism. The article quotes a private equity executive speaking on background, saying: “Public company boards are scared to death of activists and will do all kinds of things to avoid proxy contests.”

With this business context in mind, the May/June issue of NACD Directorship magazine focuses on entrepreneurship and activist shareholders: who they are, what they want, and why they want it.

The dispersed global ownership of companies today, enabled through technology, has evolved into the complex adaptive system we call the global stock market. As we know from its recent volatility, the market can act a little crazy. But behind every single share that is traded there is a person who made a decision to buy or sell—often as a fiduciary (in the case of institutions). Directors can and should learn from them, even as they maintain their roles as representatives of all stakeholders.