Just in:
New Nylon Constant Torque Hinge From Southco Provides Position Control In A Compact Package // Hope for Respite as UAE Endorses UN Plea for Gaza Truce // Following the Money Trail: US and UK Investigate $20 Billion in USDT Transfers Tied to Sanctioned Russian Exchange // CABSAT 2024 Ushers in 30 Years of Media Innovation // Ajman Celebrates Conclusion of Ramadan Activities with Grand Ceremony // German Job Market Resilience Bodes Well for Economic Recovery // Konica Minolta is named ASEAN 2023 Market Leader in Colour Light and Mid Digital Production Printers // First-Ever Fortune Innovation Forum Draws Top Global Leaders to Hong Kong, Promoting Agendas On Collective Cross-Sector Advancement // Arvind Kejriwal Was Used By BJP In 2011 Movement To Take On The Congress // Sharjah Chamber Breaks Ground on Final Expansion with New HQ Pact // Andertoons by Mark Anderson for Thu, 28 Mar 2024 // US reiterates concern over Kejriwal arrest, Cong accounts // Melco Style Presents “SANRIO CHARACTERS STUDIO CITY CARNIVAL” – Explore a SANRIO World of Unlimited Love and Cuteness // 2024 Lok Sabha Elections Will Be The Costliest One Till Now In The Whole World // Emirati Aid Reaches Ukraine as Food Shortages Bite // Ingdan Announces 2023 Annual Results // U.S. Compliance Takes Center Stage at OKX Following Industry Jitters // TUMI Hosts Global Launch Event in Singapore to Unveil Women’s Asra Collection and Announce Global Ambassador, Mun Ka Young // Global Audience to Witness Thrill of Dubai World Cup // Experience Ultimate Shopping Freedom at 4.4 Shopee Spree: Don’t Worry, Shop Shopee! //
HomeMarketsThe reasons for a stagnating US public equity listings market

The reasons for a stagnating US public equity listings market

5a08a0b6 3b18 11e7 821a 6027b8a20f23

This week’s 20th anniversary of Amazon’s initial public offering has thrown into sharp relief the stagnation of the US public equity listings market.

Finger-pointing by some at the regulatory requirements of going public — which can be burdensome and costly for small companies — is now yielding to a discussion about longer-term headwinds such as the ready availability of private funding for young companies and the culture of litigation in the US.

ADVERTISEMENT

Appeal of private markets

The abundance of private capital has swelled the herd of so-called unicorns, or private companies valued at more than $1bn. With private markets flush with cash, the latest crop of hot tech companies have opted to stay private longer.

“It is going to be a continued theme because of the amount of money coming into the fold from private equity to hedge funds,” says Eric Kim, co-founder of Goodwater, a fund that invests in private deals. “A lot of money is pouring in so companies like Snapchat and Uber can stay private longer. When yields are so low where else do you get alpha?”

While private capital is one factor deflating the IPO market, an increase in the number of venture capital-backed companies opting to sell instead is another factor. According to the research of Jay Ritter, a professor of finance at the University of Florida, during 1990-91, 20 per cent of the exits of successful venture-backed companies were M&A transactions, typically sales to a larger company in the same industry, and 80 per cent were IPOs. By 1998-2000, 60 per cent were sales and for 2001-16 that share jumped to about 90 per cent.

Investors risk losing out

The Amazon anniversary is not just drawing attention to the dearth of US IPOs. The best performing IPO in the US since 1995 — only highlights concerns that future retirees who rely on investments in the stock market are missing out on similar opportunities as companies stay private for longer.

Although large mutual funds in recent years have begun investing in companies while they are private and pension funds have exposure to venture capital, when that is put into a fund or funds it represents typically a small portion of portfolios.

“You read about Fidelity and other major asset managers taking significant stakes in private companies like Uber,” says John Gulliver, executive director of research at the Committee on Capital Markets Regulation, a policy group. “It may be true in aggregate, but it is not true in terms of portfolio exposure for the individual investor.”

Legal deterrent

Some point to the threat public companies face from class-action lawsuits as another factor diminishing the appeal of the IPO process. Allowing shareholders to choose whether they want securities class actions is “the real low hanging fruit,” in a quest to increase the volume of IPOs, says Mr Gulliver. The committee argues that these impose costs on companies, hurt stocks prices, but fail to deter wrongdoing or compensate investors. Instead, they want regulators to pave the way for companies to use individual arbitration instead, which is typically a shorter and simpler process for a company as well as less expensive.

“We also need to think about how [regulators] can target the individuals who actually commit wrongdoing,” Mr Gulliver says, rather than penalising shareholders that suffer the consequences of settlement costs.

Source link

ADVERTISEMENT

ADVERTISEMENT
Just in:
Sharjah Chamber Breaks Ground on Final Expansion with New HQ Pact // Infineon and HD Korea Shipbuilding & Offshore Engineering jointly develop ship electrification technology // Melco Style Presents “SANRIO CHARACTERS STUDIO CITY CARNIVAL” – Explore a SANRIO World of Unlimited Love and Cuteness // Experience Ultimate Shopping Freedom at 4.4 Shopee Spree: Don’t Worry, Shop Shopee! // Andertoons by Mark Anderson for Thu, 28 Mar 2024 // Hope for Respite as UAE Endorses UN Plea for Gaza Truce // Following the Money Trail: US and UK Investigate $20 Billion in USDT Transfers Tied to Sanctioned Russian Exchange // Sharpening the Focus: Sharjah Health Department Refines Evaluation Criteria for “Healthy Schools Programme” // Konica Minolta is named ASEAN 2023 Market Leader in Colour Light and Mid Digital Production Printers // AIA Hong Kong Wins More Than 20 Accolades at MPF Ratings MPF Awards, BENCHMARK MPF of The Year Awards and Bloomberg Businessweek Top Fund Awards // Universal Language for Healthcare: General Authority Embraces Global Coding System // Global Audience to Witness Thrill of Dubai World Cup // No running of govt from jail, says Delhi Lt Governor // U.S. Compliance Takes Center Stage at OKX Following Industry Jitters // Emirati Aid Reaches Ukraine as Food Shortages Bite // 2024 Lok Sabha Elections Will Be The Costliest One Till Now In The Whole World // US reiterates concern over Kejriwal arrest, Cong accounts // Sunshine’s Debut Features Leave Tech World Scratching Its Head // Lisboeta Macau’s world first LINE FRIENDS PRESENTS CASA DE AMIGO and BROWN & FRIENDS CAFE & BISTRO has officially opened // French Leaders Gather for Interfaith Iftar Dinner //