James Surowiecki, writing in The New Yorker:
[C]ompanies like Facebook don’t really need the money that an I.P.O. raises. Thanks to things like open-source software and cloud computing, the cost of starting and expanding a technology company has fallen dramatically, and Facebook’s operating profit is more than enough to fund its growth. (Its I.P.O. prospectus is up front about the fact that it envisages no “specific uses” for the sixteen billion dollars it just raised, most of which it will park in U.S. treasuries, like an aging retiree.) Investors, in other words, need potential highfliers like Facebook more than the companies need them.
Compounding this problem is the fact that being a public company is no longer as alluring as it once was. The hassles of dealing with Wall Street and manic-depressive investors have arguably never been worse, even as a whole infrastructure has sprung up to make it easier for companies to stay private while still giving their owners and employees a chance to cash out. That’s partly why the number of I.P.O.s has dropped sharply in the past decade, and why the number of public companies in the U.S. has fallen by more than forty per cent since 1997. For many start-ups, staying private or selling yourself to a bigger company—as Instagram did when it sold out to Facebook for a billion dollars—has never looked more appealing. Public companies aren’t going to disappear, but we are witnessing a significant shift in power from shareholders to entrepreneurs and managers, one that may make the stock market less central to American capitalism. Facebook’s I.P.O. was the biggest tech I.P.O. the U.S. has ever seen. It also seems likely to be the biggest it will ever see.