The benefits of companies going private
Companies can more effectively run themselves when they don’t have to answer to the public markets on a quarterly basis, according to one portfolio manager.
“That’s just the flat-out truth of it,” Jeff Weniger, director of asset allocation at Wisdom Tree Asset Management, told BNN Bloomberg Thursday.
His comments come one day after Calgary, Alta.-based WestJet Airlines Ltd. CEO Ed Sims told BNN Bloomberg he’s eager to escape the wrath of “sell-side analysts” now that the airline’s takeover by Toronto-based private equity firm Onex Corporation has been granted final regulatory approval.
“Here’s another Canadian gem no longer available for mom and pop to play,” Weniger added.
He said the intense scrutiny public companies face goes back to the turn of the century, when bombshell revelations of accounting fraud at energy company Enron Corp. and telecom giant WorldCom resulted in the toughening of disclosure rules.
“It really increased the amount of filing you have to do,” Weniger said.
Swings in Lululemon Athletica Inc. shares since the company went public in 2007 serve as an example of how a company’s stock performance can hinge on the perceptions of public-market investors and analysts, Weniger added.
“You can see how [the company faced] public scrutiny going back to the fat-shaming scandal four years ago, to suddenly [becoming] the darling of the market,” he said in reference to comments made by Lululemon founder Chip Wilson in 2013.
“You can just be so susceptible to the vagaries of the news cycle.”