2021 was the year of the IPO nationwide, with some $600 billion raised via traditional public offerings and SPAC deals, easily besting the prior record year of 2007, according to national reports.
That was certainly the case in OC, with 11 local companies raising $15.2 billion via traditional IPOs, a figure that doesn’t count several SPAC deals involving area companies. Both figures are, by a wide margin, local records.
See our front-page story and page 22 list for the details on a busy 2021 for founder-CEOs of local companies—including Rivian’s RJ Scaringe, Vizio’s William Wang, Alignment Healthcare’s John Kao and loanDepot’s Anthony Hsieh, among several others—who listed their businesses on Wall Street.
That’s the good news. A recent research report, co-authored by UCI’s Travis Howell, an assistant professor at the Paul Merage School of Business, casts some doubt on the value of the founder-CEO, and suggest readers and investors in those IPOs should check back here in three years or so.
December’s “The Founder Premium Revisited” report states that for founder-led businesses that go public, “a valuation premium is associated with founder leadership at IPO, but that it quickly disappears as these firms underperform on the secondary market.”
The report is based on the stock performance and other data from nearly 2,000 public companies, “about half of which were led by founder-CEOs at the time of collection.”
“We found that the value added by a founder-CEO essentially dwindles to zero approximately three years after firms go public, and they then start detracting from the value of the company in the longer term,” the study’s authors said in a related Harvard Business Review article.
Why the drop-off? “One reason that theory on managerial capabilities predicts that publicly traded firms with founder leadership will underperform relative to other public firms is because a founder has the authority to control their firm but lacks the managerial ability to successfully guide a complex business. Thus, the characteristics of founders are likely to differ from professional CEOs,” the report cites.
The researchers suggest funneling founders of public companies towards non-CEO positions, or towards their personal passions, and involving them in succession planning.
For more on 2021’s breakout IPO stars in OC, see next week’s print edition of the Business Journal, which holds our annual Businesspeople of the Year profiles.
Larry Armstrong has designed plenty of large objects; he’s the chairman and former CEO of Irvine’s Ware Malcomb, one of the area’s larger architecture and design firms.
Now Armstrong, who also counts a thriving career in the art world with numerous exhibitions to his name, is going smaller in design. He’s launching the Artist Series of handcrafted wireless phone chargers for Newport Beach’s Volonic, a high-end consumer tech firm created in 2019 by cellphone accessory firm Mophie co-founder Shawn Dougherty.
Volonic in October raised $2 million in funds to grow the brand, Armstrong was among the investors.
Chargers designed by Armstrong run $750. It’s a bargain compared to an earlier release from Volonic in 2021, a limited edition, gold phone charger offering with a $250,000 price tag. None were sold, company representatives said.
Proceeds from the sale of Armstrong’s chargers are going to charity.
