SEC Rules Aren’t Big IPO Issue, Industry Representatives Say

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By Andrew Ramonas

Financial industry representatives and observers appeared skeptical May 10 that the SEC is a major contributor to a downward trend in initial public offerings as the agency’s new leader looks to reverse the tide.

Participants in a conference on the U.S. initial public offering market generally expressed support for Securities and Exchange Commission regulations governing public companies, although some said financial burdens associated with going public could be reduced. Chairman Jay Clayton, who took office May 4, has said he will work to reduce IPO hurdles, but hasn’t released a detailed plan.

Globalization and other economic factors play a larger role in the IPO market than regulation, said Chris Cooper, global chief financial officer of venture capital firm Sequoia Capital.

“Regulation is not the problem,” he said at the gathering hosted by the SEC and New York University’s Salomon Center for the Study of Financial Institutions. “It’s not the hurdle.”

‘Meaningful Room for Improvement’

The number of private companies that have had five or more venture capital-backed financing rounds has increased considerably from 2005 to 2016, indicating that more companies may be staying private longer, according to Bloomberg data. In 2016, 56 such deals raised about $9.3 billion dollars, compared to 29 that raised $700 million in 2005.

Clayton, who worked on Alibaba Group Holding Ltd.’s $25 billion IPO and other such offerings as a lawyer at Sullivan & Cromwell LLP, said at his confirmation hearing in March that he sees “meaningful room for improvement” in making public capital markets more attractive to businesses.

A spokesman for Clayton didn’t immediately respond to a request for comment.

Reviving the IPO market might be unnecessary, said Robin Graham, a managing director at investment bank Oppenheimer & Co. Inc. With companies taking longer to go public, the businesses are more mature and predictable, he said.

“That’s a good thing for individual investors,” Graham said. “It’s a good thing for the economy.”

To contact the reporter on this story: Andrew Ramonas in Washington at aramonas@bna.com

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