Is This the Worst Decision a Private Tech Company Can Make?
Many technology start-ups are waiting longer to go public these days, and Nasdaq CEO Bob Greifeld said Thursday he backs that decision in many cases.
"I think the worst thing in the world is to go public too soon," he told CNBC's "Squawk Box." "I'd rather see companies wait a little bit longer, have an opportunity to provide the proper liquidity to their investors and employees, and they make sure they come public with a mature business model."
Start-ups are putting off initial public offerings for many reasons these days, including relaxed securities regulations for small business investment and robust private capital markets, which have created a growing number of billion-dollar start-up "unicorns."
In the last decade, the length of time it takes companies to go public has essentially doubled, according to Greifeld.
Nasdaq is capitalizing on this trend. Its subsidiary, Nasdaq Private Market, announced last month it had acquired SecondMarket, which facilitates liquidity for private company securities.
"We certainly believe staying private is a good alternative, and we also believe when you come public you need to have a fully mature business model and you should not rush that date," he said, noting that public companies face a rigorous and endless series of quarterly reports.
Greifeld said the IPO market remains strong this year despite a steep drop in initial public offering volume in the third quarter amid extreme market volatility.
IPO proceeds totaled $7.3 billion in the third quarter, down 81 percent from a near record $38.1 billion in the period last year, according to Pricewaterhouse Coopers' IPOWatch. That quarter included the IPO of Chinese e-commerce giant Alibaba, the largest global stock market debut ever.
The Nasdaq's current backlog of 77 IPOs represents a "normal" rate, Greifeld said. He noted that number is understated because the 2012 JOBS Act allows companies to confidentially file for a public offering in order to test the waters.
"We could only be seeing the tip of the iceberg. We don't know as much," he said.