WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy, issued the following statement in connection with Better Markets’ new Fact Sheet, “The SEC is Killing IPOs,” released ahead of a House Financial Services Committee hearing entitled “The Future of American Capital: Strengthening Public and Private Markets by Increasing Investor Access and Facilitating Capital Formation”:

“Tomorrow, Congress will hold a hearing examining the role of the public and private markets in investment opportunities and capital formation. Although Congress appears poised to consider further expanding the private markets, it should do the opposite. The public markets are what allow regular investors to buy into successful companies. And they do so by providing investors with the disclosures that they need to determine how best to invest their hard-earned money, which also facilitates the most efficient capital formation.

“Indeed, research shows that a dollar of capital allocated in public markets generates $0.35 more in annual revenue over the next three years than a dollar allocated in a comparable private market deal. That same research identifies the reason as better informational efficiency in public markets, which helps investors direct capital to its most productive uses.

“Unfortunately, the SEC over the years has decimated the public markets through a series of exemptions from the federal securities laws that have allowed companies to continuously raise capital without undertaking an initial public offering. This led to the IPO market reaching a 32-year low in 2022, and it has barely rebounded since then. Just as IPOs have declined dramatically, there are now fewer than 4,000 publicly traded companies in the United States, down from more than 7,000 publicly traded companies in 1998.

“This shift has real consequences. A dwindling public market means fewer opportunities for all investors and fewer opportunities for efficient capital allocation. And burgeoning private markets means less transparency and less overall investor confidence.

“All this means that we should not be further expanding the private markets. Instead, we should be finding ways to revitalize the public markets. More IPOs and more public companies would benefit investors, capital formation, and the economy as a whole.”

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