Sean Parker has come out and said what Mark Zuckerberg is probably thinking right now: Screw IPOs.
Appearing on CNBC Thursday, Parker, the former president of Facebook, told reporters that lately the benefits of taking a company public have become "less clear."
"My preference is to always keep a company private," he said. "We now have very efficient secondary markets with SEC-qualified investors, hedge funds and family offices that are actually willing to buy private securities."
Parker, who recently picked up $33 million to launch his new startup Airtime, was the co-founder of Napster, the music-sharing service he took public after just 16 months in operation in 1995. But, as Parker's comments Thursday suggest, a lot has changed since then.
One of the most notable changes has been the recent growth of private secondary markets. Companies have long given out stock to employees before going public. But as the time between a firm's birth and its IPO has increased, secondary markets have emerged to bring together shareholders looking to cash out with buyers betting the stock will skyrocket after an IPO.
Parker, for his part, unloaded more than 3.6 million Facebook shares ahead of its IPO in a private transfer after March 31, 2012, according to SEC filings.
As Parker noted Thursday, such transactions have become so efficient that private companies and their shareholders are happy living off hedge funds, mutual funds and wealthy backers, rather than using public exchanges like the NASDAQ and NYSE to cash out.
So what are the costs to the U.S. economy of companies shunning IPOs? Jobs, for one. Recent research found that companies that went public from 1996 to 2010 more than doubled their headcount after their IPO.
"It’s really a bad situation if people believe going public is the wrong thing," Laurence Fink, the chairman and CEO of private equity firm Blackrock, told CNBC reporters Thursday. "It was part of the dynamism of our economy that entrepreneurs could take their companies public and sell their companies at a multiple and then use that multiple to build and build and build."
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