New Stealthy IPOs Kick In This Week

New Stealthy IPOs Kick In This Week

By Eve Tahmincioglu

 

As of this week, private companies looking to go public can now do it with little attention.

 

The Securities and Exchange Commission's new rule allowing companies to file initial public offering (IPO) paperwork confidentially kicked in Monday and the agency's Chairman Jay Clayton sees it as a boon for public markets that have seen declines in recent years.

 

It could lead, he said in a statement, to “efficiency in our processes to encourage more companies to consider going public, which can result in more choices for investors, job creation, and a stronger U.S. economy."  

 

The number of publicly traded companies has been on the decline, with more and more companies opting to stay private or delay initial public offerings, or IPOs.

 

The allure of being private may be one reason for the decline in initial public offerings and the overall number of publicly traded firms, according to a recent Fortune article.

 

“More and more promising companies are opting to stay private longer. After all, why bother with the hassle of shareholders and financial disclosures, when there's enough VC funding to go around?”

Fortune’s research on the issue found that there has been a “precipitous decline in the number of companies that hold an initial public offering” and  “a dramatic decline in the overall number of publicly listed companies in the U.S.”

Here are the findings:

  • 65% decline in the number of U.S. IPOs from a 2014 high of 363. The flow of initial public offerings slowed considerably in 2016, hitting just 128—the lowest number since the financial crisis—with few signs of picking back up.
  • 37% decline in the number of U.S.-listed companies since its 1997 high. With more companies opting for private fundraising over the hassle of public markets, the number of public companies has fallen to 5,734, about on par with the early ’80s.

Clayton addressed the issue of faltering public markets during his confirmation hearings and has followed through on his promise to make them more attractive to private companies.

 

"It is clear that our public capital markets are less attractive to businesses than in the past. As a result, investment opportunities for Main Street investors are more limited," he said. "Here, I see meaningful room for improvement.”