Should Nortel Go Private?

By Mark Evans | October 7, 2008

With its market capitalization sadly shrinking (US$928-million), does it make any sense at all for Nortel to consider going private?

On one hand, it makes no sense because reducing Nortel’s ability to tap capital markets would, in theory, be a bad move. Nortel still needs access to capital even though raising money at this point isn’t exactly ideal - not only because the stock has crumbled but the capital markets aren’t exactly user-friendly these days.

That said, Nortel could sure use a few years to privately lick its wounds and work on revitalizing the company without the scrutiny of investors and the aggravation of having to report its financials.

The current - or new - management team could focus on strategy and making decisions for the long-term as opposed to meeting the short-term expectations of the market.

Of course, it’s highly unlikely Nortel would ever consider going private but at what point would it make sense. I mean if Nortel’s market cap fell to $500-million, why not use the proceeds of the metro Ethernet network business sale - assuming they can sell it - to take out shareholders?

Update: Fred Wilson (aka A VC) has some thoughts on what happens after the markets bottom out. He’s looking for stock buy-backs and “large private equity and buyout firms doing going private transactions with all equity cap structures, and possibly foreign companies seeking bargain acquisitions in the US.

Final results: Yes, 224; Makes No Sense, 112; No, 57.