Why Everyone’s Obsessed With IPOs—And Why They’re Missing the Point

You know how it goes. Every time some hot startup goes public, financial news loses its mind. “Biggest IPO of the year!” “Another tech unicorn hits the market!” But here’s the thing—we’re all getting distracted by the shiny new toy while ignoring the real workhorse of the economy. It’s not those flashy IPOs that move the needle long-term. Nope. The real magic happens when companies that are already public go back to the well for more funding. And yet, nobody’s talking about that.

The IPO Hype Train Needs to Slow Down

Let me put it this way—we treat IPOs like they’re the ultimate report card for the economy. Market booming? Must be all those IPOs! Market sluggish? Must be an IPO drought! But that’s like judging a restaurant solely by how many new customers walk in the door, while ignoring all the regulars who keep coming back.

Here’s some cold, hard data that might surprise you. Last year, companies that were already listed raised over $600 billion globally by issuing more shares. IPOs? They scraped together less than half of that. Makes you wonder why we’re all so obsessed with the new kids on the block when the veterans are doing most of the heavy lifting.

Why Established Companies Need Love Too

It’s Not Just About Getting Listed—It’s About Staying Competitive

Think about Amazon for a second. That 1997 IPO everyone talks about? That was just the starting line. The real story is how they kept going back to investors—sometimes hat in hand—to fund crazy ideas like AWS and that insane logistics network. Same with Tesla. Those secondary offerings weren’t just about raising cash—they were about doubling down on bets that seemed nuts at the time but look genius now.

And here’s something else most people don’t realize—secondary offerings are actually more democratic than IPOs. When a company does a follow-on, regular investors like you and me can get in at market prices. No fancy investment banks deciding who gets the good stuff.

This Isn’t Some Zero-Sum Game

Look, I’m not saying IPOs are bad. They serve their purpose—giving early investors an exit, letting founders cash in some chips. But the idea that they’re competing with secondary offerings? That’s just silly. Markets like Japan have had thriving secondary markets for decades without killing their IPO pipeline. They’re two sides of the same coin.

What the Numbers Really Tell Us

Over the past ten years, follow-on offerings accounted for nearly 60% of all equity raised in developed markets. And get this—the IMF found that secondary offerings actually correlate better with GDP growth than IPOs do. Why? Because it’s not about betting on potential—it’s about funding actual, tangible growth.

As this economist I read once put it: “A stock market’s strength isn’t about how many companies join—it’s about how well it supports them after the party’s over.”

Wisdom From the Old Heads

Charlie Munger Had It Right

God rest his soul, but Munger used to say judging a company by its IPO is like judging someone’s life by their birthday. Berkshire didn’t build an empire by chasing IPOs—they did it by smart reinvestment, by knowing when to go all in on what was working.

The Research Backs This Up

A study from a couple years back found markets with active secondary offerings spent 30% more on R&D than IPO-crazy ones. That liquidity matters—just ask Moderna. When COVID hit, they didn’t have time to mess around. Issued more shares, scaled up production, and probably saved a few million lives in the process.

Where Do We Go From Here?

We need to grow up about how we think about capital markets. Regulators could help by making follow-on offerings less of a paperwork nightmare—Europe’s already moving in that direction. Investors should start asking companies not just about their IPO plans, but about their long-term capital strategy. And public markets? They’ve got to offer more than just a one-time coming-out party if they want to compete with all that private money sloshing around.

Bottom Line

IPOs are like fireworks—exciting, attention-grabbing, but over in a flash. The real work of building businesses happens in the quiet, consistent reinvestment that happens after. Maybe it’s time we stopped treating a company’s public debut like the finish line and started paying attention to everything that comes after. Because at the end of the day, nobody cares how loudly you plant a tree—they care about the fruit it bears.

Source: Financial Times – Companies