Is Shake Shack's IPO a good thing?

[JayhawkSD]

15. EGADS indeed.

"You mean they sought to maximize the value of the company before they offered shares to the public? EGADS!"

Yes, I do have a problem with waiting until the value has maxed out before offering it to the public. Then the public "benefits" from a falling stock value rather than a rising one, while the founders benefit from a stock which had an actual cash value of zero, and a significant portion of which they retain, being sold to the public (and given to them for free) at its maximum value. That is a sophisticated and legalized form of theft.

"the future profit stream of the company is discounted to a present value"

No IPO is ever issued at the present value of a company. It is issued at hundreds, thousands and sometimes millions of times the present value. The IPO is always issued based on the anticipated future of the company and never on the present state of the company.

The high tech "dot com bubble" was filled with IPOs issued by companies with negative equity and negative earnings and based on hyped up future earnings. They did not "discount their future profit stream to present value," because if they had they would have been paying investors to take their stock.

"The issuance of stock merely puts a "public" price on the shares owned by management."

And that stock is a form of wealth and it is in their pocket. It is owned by them, as even you admit. It may not be possible for them to sell it immediately, but they can use it as collateral, they can show it on their balance sheet, and the ownership of that stock makes them enormously wealthy.