Fewer IPO’s: the reasons

Relating to my last post on Crowdfunding and the 99%, yesterday’s Wall St Journal had an excellent summary of the state of the US IPO (Initial Public Offering) market, written by Jack Markell, Governor of Delaware.

In my earlier Crowdfunding post, I made the point that the small, early-stage companies that a public investor could invest in 20 years ago no longer do IPO’s on exchanges like NASDAQ, and I felt that was part of the compelling argument in favor of new initiatives like Crowd Funding. Mr Markell adds a lot of color to this, explaining how the “US has experienced a stunning decline in IPOs …. while capital markets in Asia, Europe and South America have thrived“. He cites both a decline in annual IPOs over the last decade, and a decline in total listings on US exchanges (from 8,800 15 years ago to 5,000 today).

This is a different point than the one I was making, but I suspect there are common causes for these two phenomena.

Mr. Markell goes on to explain the relative decline in the global importance of the US as far as new IPOs are concerned by citing these causes.

  • Sarbanes-Oxley and Dodd-Frank (legislative “reforms” introduced in the last decade) create unreasonably high accounting costs and disclosure requirements for new IPOs … for companies with revenues below $1Billion and market caps below $700Million.
  • The US has an uncompetitive corporate tax structure compared to some alternate geographies.
  • US tax and regulatory policies limit companies’ flexibility to conduct business in multiple jurisdictions (not so well explained in the article).

Makes for an interesting read. I wish topics like this were getting more air time.

Trackbacks

  1. […] global trends such as the decline of profitability of small business. OK. Here I am pretty sure I (and others) are right and Prof Johnson is wrong. Ask anyone familiar with the Silicon valley scene and you […]

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