Loosen the Rules Stifling IPOs by Venture-Backed Startups
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modernized while maintaining the regulatory principals that serve to protect investors.
In addition, regulations that govern investor communications and research have appropriately been rewritten over the last 15 years with the objective of consistent disclosure that limits the opportunity for conflict. All of that remains important to small and large companies alike. However, some aspects of these rules can unintentionally stunt the growth of newly public companies by limiting their ability to build direct relationships with their new public investors.
Add to this the consequences of the Spitzer Decree and decimalization, which have collectively shifted the volume and, therefore, the economics in the securities markets towards the frequently traded issues of large cap stocks. The objective was to insure low cost, frictionless trading. The unintended result is that new, small cap issues can struggle in today’s public markets.
If we don’t modernize these one-size-fits-all public company rules and regulations, I’m doubtful our economy will ever see the next wave of small public companies that grow to become this generation’s blue chip leaders. I’m talking about companies such as Apple, Amazon, Cisco, Fedex, Intel, Genzyme, Google, HP, Microsoft and Oracle, each of which was able to go public, allowing them to create new industries, and with them, tens of thousands of high-quality jobs. These once small IPOs are now global industry leaders, employ almost 1 million people, have created $1.3 trillion of shareholder wealth while paying billions of dollars in annual taxes to federal, state and local governments. To maintain that level of job creation and growth, we need to get the IPO market back on track.
As an investor in young private companies with massive potential, there is nothing I enjoy more than working with a great entrepreneur to help a company grow. Yet the biggest impact of private companies comes when they enter and flourish in the public markets. Research shows that 92 percent of job growth in venture-backed companies typically occurs post-IPO. Today venture-backed companies that were able to go public account for 21 percent of America’s GDP. We need to act decisively to bring about a return of this level of job growth to the U.S. economy.
Given the many Americans who are searching for these jobs, count me in to throw a punch or, even better, lend a helping hand to solve this problem.