As executives at Laird Superfood discussed the future of the plant-based beverage company earlier this year, taking the leap from privately held to publicly traded provided them with the best way to maintain control over the company and follow through on their goal of providing healthier fare to more consumers.
"What [going public] allows us to do is keep control of our own destiny and, of course, protect ourselves and the company," said Paul Hodge, CEO of Laird Superfood, on the day of the company's IPO in September. "We don't ever want to sell this company."
Laird Superfood, whose portfolio includes creamers and hot chocolates with functional mushrooms, organic coconut sugar, coconut water with calcified red marine sea algae and coffees, is small in size compared to many companies that go public.
The Oregon-based operation had revenue of $13.1 million in 2019 compared to $8.3 million a year earlier. In the first six months of 2020, revenue increased to $11.1 million. But at least early on, the company's decision to do an IPO has proven to be a sound one. After pricing its stock at $22 a share, it was trading at $54.60 on Tuesday, giving it a market capitalization of $475 million.

Courtesy of Laird Superfood
"We knew that there was a demand on Wall Street for natural food companies, and there hasn't been many that have gone public because of all the aggressive [venture capital] activity and all the M&A activity and the acquisitions that are happening, so we knew that we would probably be well received," Laird Hamilton, the company's co-founder and big wave surfer, said.
Hamilton added that a takeover of the company by a large food company or private equity firm before going public could hurt the brand's mission. "We've both seen it happen too many times where you see a product and then once somebody takes it over, or buys it or they sell it, then all of a sudden the ingredients are different, the messaging is different, just everything just changes," he said.
Past regrets
A 2018 New York Times story noted there are fewer small and midsize companies trading on the stock market today. In the case of small businesses, they are either snapped up by larger companies first or there is ample money being extended to them from venture capitalists or asset managers — both options that allow them to avoid the volatility and scrutiny that come with being public. The paper noted at the time that the number of listed companies peaked in the late 1990s, before the dot-com bust, but had been cut in half by 2016.
Erik Gordon, a business professor at the University of Michigan, said there is a growing "reluctance" among companies to venture out into the public markets. "When they talk to those who have gone public, [companies considering an IPO] rarely hear this has been much fun," Gordon noted. "If they need money, they look at other alternatives" first.
"If we had to do it over again and knew what we knew today, we probably wouldn't be public. For our size, there is a point of diminishing returns."

Norman Snyder
CEO, Reed's
Norman Snyder, who took over as CEO of beverage maker Reed's in March, estimates his business spends about $1.5 million annually on being public — about 5% of its revenue in 2019 — a figure he said doesn't include management’s time on compliance issues, preparing, reading and filing necessary documents, and other various time commitments. He estimated for companies having revenue above $200 million to $400 million a year is a meaningful threshold where the benefits of being public outweigh the costs.
"If we had to do it over again and knew what we knew today, we probably wouldn't be public," said Snyder, whose $62 million business makes Virgil's root beer and ginger sodas. "For our size, there is a point of diminishing returns."
Small companies whose stocks are publicly traded said it comes with both positives and negatives. By trading on an exchange, businesses have easier access to raising capital by selling stock or adding debt to grow their companies, they get publicity that could draw in new investors, and it's easier for individuals to buy and sell the stock. When a company is private, bigger blocks of shares are typically held among a few investors where it is harder for them to exit their position.
The downsides are largely relegated to outside influence over the company and the time needed to remain in compliance with SEC guidelines. Companies are tied to specific calendar requirements when it comes to things such as audits and quarterly and annual SEC filings.

Additional responsibilities also can crop up when it comes to who owns the stock. If shareholders are unhappy with the way the company is operating or they don't think highly of the CEO, the business can be subjected to outside involvement.
Last year, Reed's former CEO Val Stalowir abruptly left after two years at the helm as part of “management restructuring.” John Bello, the company’s chairman, who took over as interim CEO before Snyder was appointed said the change provided Reed's with a chance to “adjust our leadership team to align with the stage of our business development.”
At the same time, CEOs also must spend time meeting with analysts or discussing their quarterly earnings during a call when many of them would rather spend their time running and building the business. They also find public markets, in most cases, are far less willing to accept a company's decision to post losses in the near term with the promise that it will generate growth later on. And finally as a public company, business have to disclose additional details about their operations they might not want their competitors to know about.
"I typically ... suggest to small companies they stay private as long as they can, if not forever, because their ability to manage their affairs is very different as a public company," said Mark Cohen, director of retail studies at Columbia Business School.
Gordon at the University of Michigan used to represent midsize companies thinking about going public when he worked as an attorney and strategy consultant. To help a client determine whether going public or another alternative was the right decision, he would put them in touch with a business that recently completed its IPO. "I didn't want to discourage them from going public, but I did want them to understand how big the changes were," he said.
Maintaining discipline
Executives said the prestige that comes with being publicly traded is a nice perk despite the hassles that come with it.
John Fieldly, CEO of energy drink maker Celsius Holdings, said being public gives you a "competitive advantage" over other companies and allows employees to have a deeper connection to the business by owning shares or controlling stock options. Fieldly said that being subjected to public scrutiny forces him to make sure every dollar he spends is really being spent wisely — "like it's coming out of my own pocket."
"I think being a public company, just going back to that it's being calculated and disciplined, is the most important aspect of that. Being overly optimistic does not do any justice [as a] public company, because you have to report quarterly," he said. "Your mistakes are amplified, especially on small numbers, small bases. A small mistake makes a very big impact on the financials."
Despite the challenges, businesses might find going private again is too expensive and it's better to remain in the public markets. When asked if his company would ever consider going private, Reed's Snyder downplayed the possibility.
"The cost and work effort to go back private, I don't want to think about that," Snyder said. "Once you're in, that's an even bigger hurdle."