In his presentation during a session called "State of the Real Estate and Capital Markets," Fisher said one of the factors in the decision to take the company private was that it wanted to pursue different areas of business. "In 2005, we felt we had exhausted our ability to grow our share price," Fisher said. "We really wanted to pursue infrastructure development and felt we should operate privately."
By operating privately, a company does not have to make quarterly earnings calls, during which time vital information about the company's strategic direction may be revealed encouraging competition. "We didn't want to announce to the world where we wanted to go because it may encourage competition," he said.
The biggest advantage to operating privately is it frees senior management time. CenterPoint estimates that its company executives save 40% to 50% of their time by not being required to speak with stock analysts and other communications activities. "Instead of talking about business, we're doing it," Fisher said.
Other benefits of going private were an estimated $4 million to $5 million in cost savings, greater flexibility, and the ability to operate with stealth and speed. Also, the company's focus has shifted away from quarterly earnings and to more of a long-term focus based on cash, rather than Generally Accepted Accounting Principles (GAAP). "If the company is going through a transitional stage, it's best to do it with the curtains drawn," he said.
Some of the drawbacks of the move is losing the share price, which gives companies an instant and, sometimes more impartial way, to determine how the company is doing. Without company stock, businesses also lose a valuable ways to compensate employees.
Shifting the ownership of a company from shareholders to one large owner also poses its challenges. With shares, there is a liquidity to facilitate changes in ownership. If a shareholder is discouraged by a company, it can sell its stock but it's harder to find a buyer for a company with one large owner. "When you have shareholders, you're dating," Fisher says. "But when you have one large owner you're married."
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