Old model is gone, but where's the new?

• Author: Marshall, Jeffrey
• Position: CAPITAL MARKETS

Investment bankers are undoubtedly feeling a lot of nostalgia these days for the way things used to be--not just since the subprime mortgage crisis hit, but before Sarbanes-Oxley and the crackdown on I-bank/analyst relationships.

Before that, lots of regional investment banks could take a small company public, help foster a relationship between it and their analysts, do a couple of financings, perhaps an acquisition or two and help grow the company to a billion-dollar enterprise. "That was how real value was being created," says Jeffrey R. Manning, managing director and head of the special situations practice in Bethesda, Md., for Trenwith Group LLC, a boutique investment bank.

Now, he argues, "you have to be a Google to have a successful IPO [initial public offering]. The irony is that guys who created a great deal of value using the old blueprint don't understand why that doesn't work anymore. But when you look at the cost of being public, and take into account the potential liability of being public ... If you're public and nobody cares, why are you public?"

Manning has fashioned a list of reasons not to be public (see table), many of which plague smaller public companies. "What's different now is that there is no analyst...