Originally Posted by TheonGreyJoy
yes and yes.
I would not expect the UFC to have a hot IPO as I do not think the company is on a big growth curve. I may be wrong as they don't release much, but in answer to the question I was replying to an IPO would likely not be a way for Dana and Zuffa to 'cash out'. Cash out as a term generally refers to selling all or almost all of your position.
No he did not. Not as the term is used. He sold a tiny portion of his holding to pay taxes.
Right. not 'cashing out' which generally involves the sale of all or most of ones position. thus the 'out' part of cashing out.
Zuckerberg almost certainly had almost zero cash to pay his taxes since all his wealth was in his stock. even still FB market cap dropped by $3B on the news.
Again the NEED to sell was precipitated by FB going public, and his stock options being 'in the money' thus he had to pay tax immediately to realize them. Had FB not gone public he would not have needed to pay that tax and thus would not have to sell. So he did not sell to cash up. It was basically a neutral transaction for him.
This here is some BS.
Cite some examples please. I am a big Buffet follower and know of none of the holdings he sells typically taking a big hit.
Buffets a value buyer who likes to by and hold and invest. Yes his investments usually grow, but no you are wrong if you think they basically go back to neutral upon sale.
But again cite some examples please.
What is cheap? For Zuffa it is doubtful the market would put any big forward value on the stock. It would likely LIST cheap and if they announced they wanted out, with all the uncertainty over who would run it and how would it be run, the stock would likely plummet.
Zuffa would be far better off seeking the same buyer now in a private sale then spending the large amount of money to take and keep the company public and then risking spooking the market and driving the price down in a sale.
what you are saying may have some truth in general but we would be hard pressed to see it applying here.
You watch too much TV. I have orchestrated several IPO's for several companies from front to back. Other then a few FB look cases the vast, vast majority of them are priced based on comparables and a Price too Earnings ratio.
You make $X per share and have Y shares outstanding and your price is pegged solidly within a range of your comparables. Rarely do you see a 10X jump over night. 2X is rare and often retreats back if it does jump up. the few exceptions are purely speculative early stage companies or new disruptive tech companies (like FB) that people simply imagine huge wins with.
You obviously understand the intricacies of the issue better than I do... but in any case, we more or less agree:
Zuffa doesn't need the liquidity, so they would never go public unless there was an opportunity to gain a large speculative bump by doing so. You suggest that this is something that isn't particularly common.
I'll defer somewhat to your... except I would argue that stocks in general are over valued. You'd be pretty hard pressed to get a similar price to earnings ratio if you were selling, say, your corner store or your gym or your restaurant to another private buyer ("My ice-cream shop earned $50,000 last year... and you can own it for the low, low price of $1,000,000!").
As for Buffet, I don't know the exact numbers, and I get that he generally invests in large companies and even though his investments are large, the percentage of the company that he buys isn't always such a huge slice. But I also know that a lot of people follow his lead (like... a LOT) on whatever he buys, so prices do rise on his purchases. Likewise, when he gets out a lot of people (probably not as many) follow him to the next investment... and just the act of selling drops prices at least somewhat (as you pointed out originally in debunking the 'cash out' option).
At any rate, I won't suggest I understand the nuances the way you do. I do know, however, that although I agree that Zuffa isn't in a position to do it, going public has pretty much always been used by some, and will continue to be used by some as a way of 'cashing out.'
(And, yeah, it's pretty hard not to put Zucherberg in that category considering that pretty much over night he went from owning a company that couldn't figure out how to generate $1 billion in total profits to a guy with a networth of around $30 billion.)