Many have recently lamented the decline in the number of IPOs and public companies generally (about half the number since the boom in 1996), and numerous reasons have been offered in explanation, from regulatory burden to hedge-fund activism. (See this PubCo post and this PubCo post.) In response, some companies are exploring different approaches to going public, leading to a resurgence in SPACs and the launch of IPOs as “direct listings,” which avoid the underwritten IPO process altogether. At the same time, companies are seeking ways to address some of the perceived drawbacks associated with being public companies—including the pressures of short-termism, the risks of activist attacks and potential loss of control of companies’ fundamental mission—through dual-class structures and other approaches. Even the SEC is currently planning a roundtable to address the causes of and potential solutions to short-termism. (See this PubCo post.) Changing dynamics are not, however, limited to the IPO process itself. And one of the most interesting concepts designed to address these issues on completely different turf was just approved by the SEC this month—a novel concept for a stock exchange located in San Francisco, the Long-Term Stock Exchange. The concept has been in the works for a couple of years now and is backed by some heavy-hitting investors. According to the LTSE’s founder and CEO, the “IPO is like a wedding. The IPO process is, what kind of wedding planner do you hire? What kind of wedding do you want to have? But being a public company is you’re now married to the public markets for the rest of your life. People have mostly focused on the IPO process — it’s like making the wedding more efficient….That’s not the problem. The problem is we have to live like this forever.” How will the new Exchange seek to improve this “married life” going forward?
As has been widely reported, there are currently two nominees to fill the two empty slots at the SEC—from the Democratic side, Robert Jackson, a professor at Columbia Law School, and from the Republican side, Hester Peirce, a fellow at George Mason University. However, Senator Tammy Baldwin had put a “hold” on the nominees back in November, as reported in the WSJ, until they provided “their views on whether regulators should rein in activist investors, stock buybacks and executive pay.” Now that they have both responded to her questions, Baldwin has lifted her hold on the nominees, according to Law360, “clearing a hurdle for confirmation.” Their responses, although not exactly surprising, provide some insight into their views on these key issues.
Many have recently lamented the decline in the number of IPOs and public companies generally (from about 8,000 in 1996 to about 4,000 now, according to EY), and numerous reasons have been offered in explanation, from regulatory burden to hedge-fund activism. (See this PubCo post and this PubCo post.) In response, some companies are exploring different approaches to going public, leading to a recent resurgence in SPACs (see, e.g., this WSJ article), while others are flirting with the possibility of “direct listings,” which avoid the underwritten IPO process altogether (see, e.g., this article discussing the pending NYSE rule change to facilitate direct listings). At the same time, companies are seeking ways to address some of the perceived afflictions associated with being public companies—including the pressures of short-termism, the risks of activist attacks and potential loss of control of companies’ fundamental mission—through dual-class structures and other approaches. Changing dynamics are not, however, limited to companies. And one of the most interesting proposals designed to address these issues is being introduced on completely different turf—a novel concept for a stock exchange, the Long-Term Stock Exchange. According to the LTSE blog, “[w]hile other proposed solutions target the IPO process, the LTSE’s mission is to transform the public company experience by relieving the short-term pressures that plague today’s businesses and laying the foundation for a healthier public market ecosystem.”
At a meeting on Thursday of the SEC’s Investor Advisory Committee, a panel discussed the declining number of IPOs, a topic that seems to be top of mind for many in the securities arena. Of course, there’s a reason for that; according to a panelist from EY, there were about 8,000 public companies in 1996, but only about 4,000 now. What happened?
by Cydney Posner Much has been written about the problems associated with the prevalence of short-term thinking in corporate America. As noted in a post from The Harvard Law School Forum on Corporate Governance and Financial Regulation, a recent academic study revealed that “three quarters of senior American corporate officials […]
by Cydney Posner In “Seeking a Cure for Raging Corporate Activism,” published on March 17, 2015, in the WSJ, the author discusses a technique resurrected from the 1980s that some believe could, on reexamination, be “a bulwark against short-termers who roam the markets, looking to force buybacks or an untimely […]