MORGAN STANLEY AT WORK

Morgan Stanley at Work is helping to create a new roadmap for private and public companies seeking to generate liquidity

When a private company seeks to go public , it usually means one of three things : firstly , a company is seeking to raise capital ; secondly , its board is planning to provide liquidity for investors and employees ; and , finally , there ’ s a desire to raise brand awareness and strengthen market position in the eyes of potential customers . The route to an IPO has often been seen as a key milestone in a company ’ s development in the global marketplace .

But in recent years – helped along by some regulatory changes and market factors – many companies are choosing to delay their route to the public markets and instead work on accessing capital through venture capital and growth equity investors to maintain their private company status .

Capital in private and public markets According to Kevin Swan , Co-Head of Global Private Markets for Morgan Stanley at Work , these days the average time for a startup company , from launch to making the move to go public , is now over 12 years .

Swan , who studied as an engineer specialising in mechatronics – a multidisciplinary field that exists at the intersection of mechanical , electrical and computer engineering – got swept into the financial world through his early career experiences in startup companies . The path led him into venture capital and later to a company called Solium Capital , which was then acquired by Morgan Stanley in 2019 .

Swan ’ s background has been instrumental in his understanding of the various reasons underscoring certain companies ’ decision to choose an IPO route or remain as private entities . The delay in going public , he explains , is mainly due to changes in the regulatory environment in addition to the flow of capital from public to private markets . This has resulted in private companies being able to raise significant capital without having to go public .

“ Over the past decade , we ’ ve seen increasing amounts of capital flow into the private markets , and we ’ ve encountered several other factors that have led to this dynamic situation , where companies are now staying private for much , much longer . Now , the average time to enter the public market for a venturebacked tech startup is much longer and these companies are valued in the billions , many in the tens of billions . Furthermore , some are able to raise enough private capital to not even necessarily need to pursue an IPO and rather enter the public markets through a direct listing .”

Even though it may take a company several years to reach the point where pursuing the public markets is a possibility , preparing for that process requires careful planning . Alternatively , while a company may wish to remain private , it may need to address its equity structure and liquidity strategy to ensure it remains an attractive option for its investors and employees as well as navigate the current economic climate .

50 fintechmagazine . com | June 2023