Public vs. Private — Wall Street Sways Fortunes
Having a strong balance sheet enables VistaPrint to make day-to-day operations investments that resemble the annual capex budget for many printers, according to Keane. Current quarterly capital investments (excluding the software development budget) were expected to total $25 million.
For some companies, it makes more fiscal sense to escape the public realm. Mickelberry Communications, parent company of Clifton, NJ-based Sandy Alexander, used to be listed on the NYSE. Since Mickelberry’s largest shareholder had controlling interest and the holding company’s businesses in the aggregate were relatively small, the stock was thinly traded. The cost of compliance to remain public was in excess of $1 million, recounts Roy Grossman, president and CEO.
“There was a lot more flexibility in taking the company private. It allowed the principal shareholder better avenues to reward senior management and more flexibility in creating equity propositions,” he says.
“Taking the pressure off having to respond quarterly to the investment community and having a long-term perspective, particularly in this business, is a critical advantage. When you have to report to the Street every quarter, you give them a (performance) target. You cannot afford to miss that target, because you’ll be slammed by the investment community. It forces you to do things short-term to make a number that is not always compatible with your long-term objectives.”
Reconciling short-term gain with long-term thinking is an art form that few CEOs have perfected, Grossman contends, and he points to Cenveo head Bob Burton as one of the few execs who can strike that balance. In the case of companies like RR Donnelley, absent organic growth, it takes acquisition binges to pacify Wall Street.
“There are some great (public) companies that have stumbled. Why? Not because their core business isn’t good,” he adds. “Look at Dell; they stumble because the minute their growth rate isn’t as dynamic as it has historically been, Wall Street discounts them. In the commercial printing industry, which is struggling to grow at the same rate as the GDP, you’re discounted right out of the gate.”