President's Blog

The JOBS Act and Its Impact on the IPO Market

September 11, 2012
post contributed by Megan Flynn

The roundtable’s President, Tim Selby, began the morning session updating membership on his recent trip to Seoul to present at the Korean Hedge Fund Conference where he spoke about best practices and compliance in the Hedge Fund Industry, a topic that is a pillar of the NYHFR.

David Weild, Chairman and CEO of Capital Markets Advisory Group, then took the podium and began the June event explaining his background and described the market trends he began taking notice of while working at NASDAQ. “You start to see a pattern with all the delistings” he said, it was frustrating to see the dysfunction in the market. I want to socialize these ideas even though people thought it was crazy, he said.

IPO success rates have seen a steady decline since 1993, and IPO’s greater than $500 million have seen the steepest decline of all (from 90%  in 1995 to 40% in 2010). According to Weild, there are three things that the stock market needs in order to function well: standard disclosure, reasonable cost, and adequate after-market incentive. Another major  issue is smaller tick sizes, which undermined US small company IPOs while further damaging liquidity for illiquid stocks. In the long term, smaller tick sizes degrade stock market infrastructure, capital formation, and undermine the economy, he explained.

The US has lost listed companies every year since 1997, Weild referred to it as the “Incredible shrinking stock market”. We are delisting stocks at a faster rate than we are listing them which is a huge problem, it’s throwing people out of work in this economy, he said, and what we’re taking about “effects markets globally, not just the US”.

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