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Public stock is acquisition currency
Stock as currency
AI is expected to disrupt a lot of businesses, and the disruptive companies don't have to be enormous. A buyer may want a legacy competitor that can't keep up, or a company with domain expertise or data that it needs. Buying either one takes currency.
The cost of cash
The alternative is raising cash every time a target appears, and that money is really, really expensive. A company that did a hundred-million-dollar or fifty-million-dollar IPO can do a secondary as many times as it needs to, as long as it's performing.
Why more will list
With so much of this cycle's capital private, a lot more companies going public would be expected, though not at the scale of SpaceX, OpenAI, or Anthropic. Broadcast.com once bought five companies for stock alone, and there was always a bigger fish to come along, with sellers happy to be acquired.
Why does stock make acquisitions easier?
A deal paid in shares needs no cash, so the buyer skips both financing and its cost. Sellers who take shares also keep a stake in the combined company's future. Cisco became known for buying dozens of startups in the late 1990s, largely with its own stock.
How does a secondary offering raise money?
A company that is already public sells new shares to investors through underwriters, which brings in cash at the current market price. The new shares dilute existing holders, since each share now claims a smaller slice of the company. In the United States, large established companies can file a shelf registration with the Securities and Exchange Commission that covers sales over up to three years.
Why are companies staying private longer?
Large pools of private capital now fund growth that once required a public listing. Founders can raise big rounds without quarterly reporting or public scrutiny. A 2017 Credit Suisse study found that the number of US-listed companies had fallen by almost half since its 1996 peak.
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