For Subscribers

Going Private?

For companies tired of taking a beating in the market, deregistration may be a temporary shelter in the storm.

By C.J. Prince

Opinions expressed by Entrepreneur contributors are their own.

WebhireInc.'s stock was trading at 50 cents on Nasdaq when thecompany's executives decided they'd had enough pummeling onthe open market. The Lexington, Massachusetts, company wasn'tthe first to get fed up with the market's prolonged dry spell,but it wasn't just another late '90s flash-in-the-panstart-up, either. Webhire, which makes Web-based software forcompanies to manage their hiring processes, has been around since1982. Its financials were fairly solid: multiple straight quartersof positive cash flow and sales in the $14 million range. But itspitiful stock price and deflated market cap were enough to scareaway not just investors, but potential business partners andcustomers, too. At the same time, the company was spending roughly$400,000 per year on the document filing, legal work and auditsrequired of public companies. New Sarbanes-Oxley regulations wouldonly add to the bill.

Going totally private, though, would have cost a small fortuneas well, as it would have required the company to do either areverse split or a tender offer to buy back all outsider stock,notes Steve Allison, the company's CFO. "You need legaladvice and a fairness opinion from an investment bank, and thenthere's the cost of the transaction," he says, adding thatthe company would have had to pay a premium over the share price toavoid raising shareholder ire. "In these litigious days, youhave the danger of being sued."

Continue reading this article — and all of our other premium content with Entrepreneur+

For just $5, you can get unlimited access to all Entrepreneur’s premium content. You’ll find:

  • Digestible insight on how to be a better entrepreneur and leader
  • Lessons for starting and growing a business from our expert network of CEOs and founders
  • Meaningful content to help you make sharper decisions
  • Business and life hacks to help you stay ahead of the curve

Related Topics

Editor's Pick

Everyone Wants to Get Close to Their Favorite Artist. Here's the Technology Making It a Reality — But Better.
The Highest-Paid, Highest-Profile People in Every Field Know This Communication Strategy
After Early Rejection From Publishers, This Author Self-Published Her Book and Sold More Than 500,000 Copies. Here's How She Did It.
Having Trouble Speaking Up in Meetings? Try This Strategy.
He Names Brands for Amazon, Meta and Forever 21, and Says This Is the Big Blank Space in the Naming Game
Business News

These Are the Most and Least Affordable Places to Retire in The U.S.

The Northeast and West Coast are the least affordable, while areas in the Mountain State region tend to be ideal for retirees on a budget.

Business News

I Live on a Cruise Ship for Half of the Year. Look Inside My 336-Square-Foot Cabin with Wraparound Balcony.

I live on a cruise ship with my husband, who works on it, for six months out of the year. Life at "home" can be tight. Here's what it's really like living on a cruise ship.

Business News

The 'Airbnbust' Proves the Wild West Days of Online Vacation Rentals Are Over

Airbnb recently reported that 2022 was its first profitable year ever. But the deluge of new listings foreshadowed an inevitable correction.

Business Solutions

Master Coding for Less Than $2 a Course with This Jam-Packed Bundle

Make coding understandable with this beginner-friendly coding bundle, now just $19.99.

Business News

'I Don't Feel Like It's Unreasonable': A-List Actor Refused Service At Hotspot For Not Following Dress Code

Academy Award-winning actor Russell Crowe had quite the afternoon after trying to stop at a Japanese steakhouse in Melbourne, Australia following a game of tennis.