Prologue – It takes a village! Back in 2008, with the support of Grant Thornton, we started developing data to demonstrate what we had known for years: That market structure changes had killed the goose that laid the golden eggs of capital formation and contributed to a lack of job growth in the United States. Our most disturbing observations, which were incorporated, cited and discussed by many in the Executive Branch, the U.S. Senate, the U.S. House of Representatives and the Securities Exchange Commission include: • Small IPOs were decimated: 80% of IPOs historically were small (sub $50 million in proceeds raised). Beginning in 1997 and 1998, with the implementation of the Order Handling Rules by the SEC and Regulation ATS (Alternative Trading Systems), the number of small IPOs abruptly declined. • Leading to 43.5% fewer publicly listed companies: The number of listed companies on U.S stock exchanges has declined in every single year since 1997. By the end of 2011, there were 43.5% fewer companies on the NYSE, NYSE | AMEX and NASDAQ than there were in the peak listing year of 1997. • And the decade of the 2000’s, with a failed IPO market, was the first jobless decade in the modern era: The 2000s represents an anomaly: It is the first decade going back to 1940 that had zero job growth. Each of the prior three decades (70s, 80s and 90s) generated more than 20 million net new jobs each. No decade since the 1940s had less than 20% net new job growth.1 Why did the decade of the “naughts” (00s) generate no new job growth? Common sense would indicate that at least part of the dearth in job creation is a result of the depressive impact on economic activity that occurs when a market, which is generating 500 IPOs a year and growing – companies that are innovating for the future - suddenly dropped to a base level of 126 IPOs a year. As IPOs decline, so in turn do investments in private enterprise – the historical bedrock
of job creation. While our published work provided the spotlight and hard data that documented the IPO crisis, The JOBS Act could not have occurred without the intense interest from many leaders in the financial services community and in government, including: • Grant Thornton, who published our work. • The NYSE Blue Ribbon Panel on the IPO Crisis (Chaired by Duncan Niederauer, CEO of the NYSE, and Dixon Doll, then Chairman of the National Venture Capital Association). “Why are IPOs in the ICU?” was released at the Blue Ribbon Panel. • The National Venture Capital Association • NYSE • NASDAQ • The IPO Task Force (Chaired by Kate Mitchell of Scale Venture PartnerP and a past Chairman of the NVCA) • The President’s Council on Jobs and Competitiveness • Silicon Valley Bank Clearly, the hearings that took place on Capitol Hill have sensitized our lawmakers to the linkage between regulation, market structure, IPOs and jobs. This is healthy. The first step on the path to recovery is recognizing that we have a problem.
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Congress recognized the problem but it took a village to make The JOBS Act a reality.
Present – Only a Start The JOBS Act (Jumpstart Our Business Startups) was signed into law by President Obama on Thursday, April 5, 2012, in the Rose Garden of the White House. It reduced many of the regulatory barriers that have made it tougher and more costly for companies seeking access to public markets to raise capital from investors and maintain their independence (not sell out). The Act is already providing a psychological boost to entrepreneurs, stock exchanges and venture capitalists who, for the first time in a decade, are enthusiastically considering new possibilities to raise equity capital to fund growth. Naysayers have expressed concerns over the potential for investor fraud. However, the approval of The JOBS Act demonstrates increasing bipartisan recognition that the fear of loss and fraud cannot be used to choke capital formation and job growth before it begins. Instead,Ssociety must encourage prudent risk taking and entrepreneurship, whild evil doers should be dealt with by regulators and the criminal justice system. Micro-Cap Review Magazine
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