Align Interests for Better IPO Outcomes

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The dynamics surrounding initial public offerings (IPOs) display significant misalignment of incentives among businesses, underwriters, and public investors. Companies aim to maximize funds raised, underwriters seek a balance between high valuations and sellable shares, while public investors hope to acquire shares at low prices for favorable returns. Historical data indicates that a substantial percentage of IPOs yield poor returns long-term, with over 60% underperforming after three years. Even when companies like Airbnb achieve operational success post-IPO, the initial pricing can lead to disappointing investor returns. This illustrates the risks of investing in IPOs and the importance of waiting to assess performance before committing capital.

On today’s episode, Kyle Grieve discusses a wonderfully well-written autobiography, “Shoe Dog” by Phil Knight, the founder of Nike. He discusses the importance of identifying and pursuing true happiness while ensuring a stable income as a fallback, the value of hustle, the importance of trust with your suppliers, why focus is so vital to business success, the hidden downsides of issuing equity, the importance of maintaining cash reserves, the complexities of growing a business, and a whole lot more!

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:30 - The importance of being aware of what will make you happy in life, and pursuing it with deep focus

07:37 - Why happiness can't be fulfilled based purely on increased earnings power

09:42 - Why hustle and unconventionality is so important to getting a nascent business off of the ground

15:36 - The difficulties of aligning incentives between lenders and borrowers in fast-growing businesses

23:29 - The importance of creating an enemy in business to help motivate executives to continue innovating and improving

25:31 - Why focused business leaders are so important, and why you want to avoid CEOs doing excessive side projects

28:56 - The aspects of cloning Phil took to increase exposure for the Nike brand

32:49 - Why maintaining positive cash balances is so important to the health of a business

47:23 - Why public businesses use dual share structures so management can maintain control

47:58 - Why IPO's have misaligned incentives for investors

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

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