I very much agree with these sentiments. We need more company formation and better access to capital for young companies that are growing and hiring (or at least capable of doing so). One of the worst things about the current state of the stock market is that the deals that get the most attention are cash-outs: Big private equity sold-to-you affairs or venture-backed start-ups that have outgrown their private status and need to provide exits for those who’ve already made a fortune.
Where are all the young, hungry companies who are proud to go public and are raising money to become great?
Check this out:
Former NASDAQ Vice Chairman David Weild IV and media entrepreneur Brett Johnson today announced the formation of the New Markets Movement (NMM) with the goal of reviving the stagnant market for initial public offerings (IPOs) and aftermarket support for public companies.
The NMM will advocate for passage of legislation to stimulate IPOs, and investments to fix the financial ecosystem and provide support for public companies. Its first goal is drafting and passage of the Issuer Choice Jobs Act, which would make the market structure more favorable for IPOs and public companies. NMM will also support other legislation that favors market improvements.
“Wall Street doesn’t need to be occupied, it needs to be fixed,” said Weild. “The United States has a proud history of launching and nurturing innovative job creators. Today, U.S. public stock markets, once the envy of the world, have become our weakest link and are failing to support job-generating growth companies.”
Weild will kick off the launch of the New Markets Movement as the keynote speaker at the Fifth Annual OneMedForum SF2012, an emerging company finance conference, at 12:30 p.m. on Tuesday, Jan. 10, 2012 at the Sir Francis Drake Hotel in San Francisco, Calif.
Weild, who is Director of Capital Markets at Grant Thornton and Chairman and CEO of Capital Markets Advisory Partners, is the country’s leading expert on U.S. capital markets and specifically the dramatic drop in IPOs and aftermarket support for public companies. In addition to serving as Vice Chairman of NASDAQ, he was head of equity capital markets at Prudential, where he priced over 500 IPOs and another 500 follow-on offerings.
Weild’s research with colleague Edward Kim inspired Johnson to contact him and suggest the formation of the New Markets Movement. Johnson publishes OneMedResearch, which is dedicated to lesser known microcap public companies, and the founder and CEO of OneMedPlace, a research and media firm that aggregates information for investors in emerging growth companies in healthcare and life sciences.
“Innovative companies no longer go public in adequate numbers to drive growth and job creation,” Johnson said, “because our system rewards computerized trading, not investors. Markets today cater to backward-looking computer-based trading strategies at the expense of forward-looking fundamental investment strategies.”
The number of IPOs in the U.S. dropped 77% in the first decade of the millennium – from an average of 520 a year during the pre-bubble years of 1991 through 1995 to just 126 a year from 2001 through 2009. There were 154 in 2010 and 125 in 2011, but many recent IPOs were for brand-name social media companies and most performed poorly after public trading began.
A Grant Thornton study found that if the number of companies going public between 1998 and 2009 had not plummeted, the economy could have generated an additional 11.6 million to 22.7 million new jobs.
Weild and Johnson believe that new legislation to fix the economic model, if signed into law, would incent equity research coverage, capital commitment and market making, encourage investment and discourage speculative trading.
The Issuer Choice Jobs Act that the New Markets Movement is proposing would empower the Boards of Directors of public companies to optimize the market for their shares by giving them the authority to establish the “tick size” in the trading of their stock. Since decimalization of stock prices, tick size, which is the monetary increment in which stocks trade, has defaulted to one cent per share and as low as 1/10th of a penny for some stocks.
Penny and sub-penny ‘tick sizes’ have induced high frequency and speculative trading in large-cap stocks, according to Weild, while in small and micro-cap stocks these tiny tick sizes have removed the economic incentive for traders to provide liquidity and for research analysts and brokers to create order flow.
“By replacing one-size-fits-all stock markets with an elegant and cost-effective mechanism to create ‘mass customization’ of markets,” Weild said, “it will give corporations a seat at the table to determine what the quality of their markets should be, rather than allowing trading interests to treat them like so many casino chips.”
Johnson said NMM will support other initiatives that can “resuscitate the IPO and put America’s job creation engine into high gear.”
About the New Markets Movement
The New Markets Movement was created to advocate for changes that will spur economic growth and job creation by stimulating initial public offerings (IPOs) and aftermarket support for public companies.