Shutterfly Offers Snapshot of Public Company Peril

There’s little debate that for small companies, being public can be a pain in the neck. The costs of complying with regulatory requirements are high; it can be tough for very small companies to attract Wall Street research and a lot of investors shy away from small stocks out of concern that trading isn’t liquid enough. That’s why there are so few of them, particularly in tech where alternative sources of capital are plentiful.

There’s another big risk in being public, of course: the possibility of tangling with an activist investor. That’s a risk for both big and small companies in tech. A case study of one such situation is playing out right now. And unlike in past corporate soap operas, such as Carl Icahn’s pursuit of Apple, the activist in this situation has some decent arguments and might prevail. If so, it would serve as an object lesson for others in Silicon Valley.