Posted on by rwoessner

Going Public is an “On Ramp to Nowhere”​ for Smaller Cap Issuers

There has been much commentary about expanding the public company “on ramp” by making it easier for companies to go public. JOBS Act 2.0 made meaningful progress in that regard. Unfortunately, the U.S. public markets are an “on-ramp to nowhere” for many smaller-cap issuers because the public markets are inhospitable to smaller cap companies. Manifestations of this inhospitability are illuminated in a LinkedIn article appearing here, articles published by equities.com appearing here, and in my Response to Commission Statement on Market Structure Innovation for Thinly Traded Securities [Release No. 34-87327; File No. S7-18-19] published just TODAY by the SEC.

Quoting from slides 2 and 3 of the SEC filing:

  • As long as the view from the IPO “on-ramp” suggests that the prospects of taking on all the additional costs and risks of going public, but struggling to capitalize the benefits, many start-up founders, managers and investors will continue to think twice about choosing to finance their growth via the public market.
  • There are thousands of smaller-cap public companies, including OTC Markets issuers, that have the potential to create millions of jobs and grow GDP.
  • Many of these companies are “dying on the vine” because of their inability to access non-toxic capital and other inhospitable attributes of the US public markets.
  • Thousands of these issuers with the potential to grow, thrive and become vibrant NYSE or NASDAQ issuers and veritable job and GDP creation machines, NEVER will achieve that. Many will stagnate; others will go out of business … with the foreseeable result that the number of US publicly listed issuers will continue to decline, and one day there will be insufficient large cap issuers for Fidelity, Vanguard, large pension funds, etc. to invest in.

Read the entire filing at https://www.sec.gov/comments/s7-18-19/s71819-6671698-204008.pdf.

Thank you for your interest as we continue the struggle to keep the US public markets the world’s pre-eminent capital market and prevent the Chinese from overtaking America.