For decades, businesses in the U.S. have had the flexibility to choose between raising capital through public offerings or private channels. This choice has allowed companies to select the path that best aligns with their capital-raising needs, investor interests, and market dynamics.
Public companies, which offer and sell securities to the general public and file mandatory disclosure reports with the Securities and Exchange Commission (SEC), benefit from access to a larger pool of investors. In contrast, private companies, which are not subject to mandatory SEC filings, can raise capital through private channels, often enjoying greater operational flexibility.
The new U.S. Chamber report, Preserving and Promoting the Private Company Ecosystem, highlights the importance of maintaining this dual-path system, which has enabled generations of prominent companies to drive American job creation, economic growth, and innovation. It emphasizes that the ability to choose between public and private markets is vital for the competitiveness of the U.S. economy. Companies must have the freedom to decide whether to go public or remain private based on their long-term interests, shareholder value, and customer needs.
However, the report also addresses recent proposals by some policymakers to restrict the flexibility that companies currently enjoy. These proposals include subjecting private companies to disclosure requirements designed for public companies or even forcing private companies to go public against their wishes. Such measures could threaten growth, opportunity, and innovation in the American economy.
Key insights from the report include:
- Flexibility in Capital Raising : The report underscores the importance of allowing companies to choose the capital-raising path that best suits their needs. This flexibility has been a cornerstone of the U.S. capital markets, enabling businesses to thrive and adapt to changing market conditions.
- Investor Protection and Disclosure : The report explains the different risks associated with investing in public versus private companies and how these risks have guided disclosure policies. It highlights the need to preserve regulatory distinctions between the two markets to protect investors and maintain market integrity.
- Economic Competitiveness : The report argues that maintaining robust public and private markets is essential for the enhanced competitiveness of the U.S. economy. It warns against regulatory overreach that could stifle innovation and limit the ability of companies to raise capital efficiently.
- Policy Recommendations : The report provides actionable recommendations for policymakers to ensure that the U.S. capital markets remain dynamic and inclusive. It calls for preserving the regulatory distinctions between public and private markets and avoiding measures that could undermine the flexibility companies need to succeed.
