Disappearing Small IPO and Lifecycle of Small Firm

The Harvard Law School Forum on Corporate Governance and Financial Regulation 2014-03-06


Editor's Note: Steven M. Davidoff is Professor of Law and Finance at Ohio State University College of Law. As of July 2014, Professor Davidoff will be Professor of Law at the University of California, Berkeley School of Law. The following post is based on a paper by Professor Davidoff, and Paul Rose of Ohio State University College of Law.

The small company initial public offering (IPO) is dead. In 1997, there were 168 exchange-listed IPOs for companies with an initial market capitalization of less than $75 million. In 2012, there were seven such IPOs, the same number as in 2003.

While there is no doubt that the small company IPO has disappeared, the cause of this decline is uncertain and disputed.

A number of theories have been offered for this decline, but the most prominent theory attributes the decline to increased federal regulation and market structure changes also driven by federal regulation. The explanation for this decline is important, because it has driven passage of the JumpStart Our Business Start-ups Act (the JOBS Act) as well as recently introduced Congressional legislation to mandate decimalization for a five-year period for all companies with a market capitalization of $750 million or below.

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Steven Davidoff, Ohio State University College of Law,

Date tagged:

03/06/2014, 09:50

Date published:

03/06/2014, 09:12