I’d want to go private too.

Just watched the markets go down between 3% and 4% today, in response to “concern about a possible slowdown”. This is newsworthy, insofar as it’s the largest single-day move in a recent memory, but those who pay attention to investing are probably of one mind that day-to-day moves are not to be closely watched.

That being said, it got me thinking about the recent (cyclical) trend toward private equity and buyouts. I plan to write about this topic at greater length in the future for those who are unclear exactly what private equity is and how it operates, but for today’s purposes I’m going to abstract away from that discussion and just say that the effect of a buyout is to take a company off the public markets and reorient it toward a private ownership structure.

Imagine I’m a company CEO. My company is doing well, growing my business, operating efficiently growing net income at a good clip. Then some reports come out that indicate a “possible slowdown” and all of a sudden my stock (which is high beta as I run a small company) is off 5.5%. Why? Did the market’s collective few of my company’s cash flows just change dramatically over night? Not likely. Yet now I have to spend significant time talking to investors, answering questions about why my stock is down, and generally doing things other than running my business.

Is it any shock CEOs are eager to go private?

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