The US has recorded several of its worst years on record for IPOs: House Subcommittee on Capital Markets to Address Decline in Public Firms

Later this week, the Subcommittee on Capital Markets, part of the House Financial Services Committee, will hold a hearing entitled U.S. Public Markets Built for the 21st Century: Exploring Reforms to Make Our Public Markets Attractive for Small and Emerging Companies Raising Capital.

As the title infers, the hearing will address the dramatic decline in public firms as more companies strive to remain private for as long as possible due to the ongoing rule-upon-regulation strategy policymakers have incorporated for years. As one should have anticipated, the onslaught of excessive regulation has compelled firms to remain private as the cost to become a public firm has risen dramatically. While recently, IPOs did increase; this was due to the hot SPAC [special purpose acquisition companies] market that is now in retreat – partially due to additional rules.

The hearing memo explains:

“The US has recorded several of its worst years on record for IPOs, while costs businesses incur to go public have doubled since the 1990s.”


“While IPOs in US markets approach their lowest point on record, the number of annual IPOs in Mainland China continues to increase. In 2022, Mainland China accounted for 39 percent of all global IPO activity. The launch of the Beijing Stock Exchange in 2021 and tighter regulatory restrictions on Chinese issuers on US exchanges have contributed to this growth. Additionally, Beijing’s “Made in China 2025” agenda lays out its plan to dominate the high-tech, biotech, and artificial intelligence [AI] industries within the next ten years. This increased pressure from foreign markets, especially Mainland China, only heightens the necessity for immediate action and reform.”

While the comparison with China is appropriate as the country has emerged as a hostile competitor to the west, it should be obvious to all that currently, initial public offerings are too frequently an exit opportunity for big money and not much of an opportunity for retail investors. Decades ago, a smaller investor could participate in a public offering in anticipation that a company may generate capital gains if it executed on its mission. Today, big money – IE, venture capitalists, and other institutions, have learned they can jump ahead of the line and hoover up much of the capital gains before shares trade on an exchange. This obviously diminishes the opportunities for smaller investors.

The hearing memo notes that a decade ago, Congress enacted the JOBS Act 0f 2012 in a bipartisan effort to both strengthen public markets as well as provide more access to capital and opportunity for retail investors. The legislation legalized online capital formation for private firms. The Subcommittee states that:

“Congress should build on the success of these provisions by introducing smart, incremental reforms that encourage companies to go public. With more companies entering our public markets, everyday investors will have greater access to investment opportunities.”

The hearing includes a list of draft legislation aiming at improving public markets.

Testifying on behalf of the Subcommittee are the following individuals.

  • The Honorable Michael S. Piwowar, Executive Vice President of MI Finance, Milken Institute, Former SEC Commissioner
  • Sue Washer, Former CEO of Applied Genetics Technology Corp. (AGTC)
  • Anna T. Pinedo, Partner and Co-Leader of Global Capital Markets, Mayer Brown
  • Stacey Bowers, Professor of the Practice, University of Denver Sturm College of Law

While the House of Representatives is seeking to boost public markets by improving them, the Securities and Exchange Commission is taking an obtuse approach of making private markets more costly and less accessible by increasing disclosure and making accredited status more difficult to achieve. Perhaps this will make public markets more appealing? Unfortunately, the Commission is also looking to increase the cost of being a public company as well with more costly disclosure, such as climate impact, an initiative that will certainly diminish the number of public firms.

The hearing will take place on Thursday, March 9, at 10 AM ET. The hearing will be livestreamed on the Committee website.



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