If one still thinks that the best of financial journalism is to be found written by journalists and columnists from the traditional print media, consider the following:
Laura Rich, Editorial Director of the American Business Monthly Inc. displays considerable naivety about the functions of capital markets in an article she wrote about the decline in the number of IPO’s, belligerently titled “No possibility of an IPO? Who cares. (sic)”
“A story in the Wall Street Journal today makes a big stink over the steadily dwindling number of initial public offerings by start-up companies” wrote the New York Times columnist on Inc.’s blog, Fresh Inc. “The numbers are indeed bleak: 2005 saw 41 IPOs by venture-backed start-ups, compared to 67 in 2004 and a booming 250 in 1999, according to data from VentureOne, which tracks that sort of thing … The point is, it's hard to see that things are, really, all that bleak for start-up companies. These days, the money's just not in the public market — it's the private market where it's all happening.”
It is difficult to believe that qualified business journalists would actually put their names to this kind of crude amateur analysis, for it shows a serious flaw in their comprehension of how private and public capital functions actually work. In the first place, any comparisons between 1999 and today are almost universally set aside by professional analysts as the bull market of the millennium is hardly a fair benchmark for meaningful quantitive data. Secondly, to suggest that there is no difference whether money remains in private equity or heads towards publicly tradable markets displays a gross misunderstanding of the most basic level macroeconomics.
Rich asks her readers rhetorically, “So, sure. The IPO market is not what it was for start-ups. But who really cares? Do you?” Well, for one, I’m sure the U.S. Federal Reserve has more than a passing interest in the performance of the IPO market, as it affects the inflow of fresh capital and companies to the NYSE and the NASDAQ, which in turn affects the prices of government bonds and the parameters for rates at which the government can afford to lend and borrow money. Also, with the current highs of the national deficit, oil prices and the recent ruminations from Beijing that China will now start to cash-in some of their reserves currently held in U.S. T-Bills in favour of international diversification, the establishment of reliable cash flow channels is hardly a done deal right now.