Tom Quaadman Tom Quaadman
Executive Vice President, Center for Capital Markets Competitiveness (CCMC), U.S. Chamber of Commerce
Executive Vice President, Center for Technology Engagement (C_TEC), U.S. Chamber of Commerce
Executive Vice President, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce
Senior Advisor to the President and CEO, U.S. Chamber of Commerce


October 15, 2020


The economic fallout from the pandemic has led to an uneven recovery, in which certain sectors do well, while others struggle. Technology and goods-producing companies look poised to thrive as their products and services adapt. Other segments of the economy like brick-and-mortar retailers and the entertainment and hospitality industries will not recover as quickly as other industries, impacting the daily life of millions of Americans.

Sadly, the U.S. has only regained half of the jobs lost since the pandemic started. Many Americans are rightly concerned about how any recovery can lift all boats. One way to do this is to create an environment where smaller companies are more likely to take their companies public.

Initial Public Offerings (IPOs) can ensure prosperity is shared in two ways: by fueling growth and broadening investment opportunities. First, IPOs allow our nation’s fast-growing and most innovative companies to raise the capital they need to create jobs and grow. It’s small, growth-oriented companies that form the foundation of the American economy.

A 2012 study by the Kauffman Foundation estimated that the 2,766 companies that went public from 1996 to 2010 collectively employed 2.2 million more people in 2010 than they did before they went public, while total sales among these companies increased by over $1 trillion during the same period. Second, IPOs let regular people buy stakes in small companies in public equity markets. You don’t have to be an insider to invest; Main Street investors can realize gains toward economic security.

In recent years, we’ve seen a steady decline in the number of IPOs, harming growth, job creation and competitiveness. This drop also prevents Main Street investors from owning a direct stake in the success of American enterprise. According to data from EY, IPO activity (excluding business development companies [BDCs], direct listings and special purpose acquisition companies [SPACs]) has been cut in half compared with last year, and gross IPO proceeds are down about 65%. BDCs are investment vehicles, while direct listings and SPACs are designed to allow founders to cash out rather than traditional IPOs which are geared for growth.

However, aftermarket performance of this year’s IPOs is up over 65% year-to-date, pointing to healthy investor appetite and the potential for traditional IPO listings to round out the year on the rebound. While this might be surprising, there’s no doubt that this year has been a challenge for smaller companies with bigger plans.

There’s reason to be hopeful that there are underlying growth incentives in the IPO market (investors searching for returns in a low-interest-rate environment). However, there may be another, overlooked reason: fewer onerous operating hurdles that can deter companies from going public in the first place.

This summer, the Securities and Exchange Commission (SEC) took significant steps to modernize the public company model to preserve its appeal. The SEC finalized its Proxy Advisor Rule and its Shareholder Proposal Rule, which have reversed policies that have emboldened special interest activists to push narrow agendas unrelated to the success of public companies and investor return. Under this new, more effective regulatory structure, public companies can focus on long-term goals without the distractions that often deter companies from going public.

While the SEC should be commended for making bold adjustments that improve the regulatory structure for IPOs, it is Main Street that benefits. When companies can successfully raise capital through an IPO—and stay public—those companies subsequently invest in growth and in employees. In turn, this helps drive economic growth in communities across the country. Meanwhile, Main Street investors can build wealth when these companies return their profits to investors in the form of increasing stock prices and dividends.

While segments of the uneven recovery do well, we can’t lose sight of the things that can make the recovery more broad-based.

In the coming months and years, let’s make sure more innovative companies can find the capital they need to grow and that ordinary investors can reap the rewards. Let’s ensure government pursues the right policies so even more companies consider going and staying public through IPOs. That will help ensure a stronger recovery not just for a few, but for everyone.

About the authors

Tom Quaadman

Tom Quaadman

Tom Quaadman develops and executes strategic policies to implement a global corporate financial reporting system, address ongoing attempts of minority shareholder abuse of the proxy system, communicate the benefits of efficient American capital markets, and promote an innovation economy and the long-term interests of all investors.

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