SEC’s Jackson Bashes Bankers’ IPO ‘Tax’ for Midsize Companies

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By Andrew Ramonas

Fees Wall Street bankers charge midsize firms to help them go public could be part of the reason behind a declining number of smaller public companies, Democratic SEC Commissioner Robert Jackson said April 25.

More than 96 percent of middle-market companies paid 7 percent of their value to investment banks for an initial public offering from 2001 to 2016, while almost half of larger companies doled out less, according to statistics Jackson released in remarks prepared for delivery at an event in Cleveland. The IPO “tax” presents “real risks for our economic future,” he said.

His remarks came a day before the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness is set to unveil a report with recommendations for reversing the decline in public companies. The chamber has said corporate governance laws and regulations are behind at least some of the decrease.

“Solutions to that problem will require more than cutting red tape,” Jackson said in remarks prepared for the Greater Cleveland Middle Market Forum event. “It makes little sense to address the decline in small public companies without grappling with the 7 percent IPO tax. In an economy increasingly built to benefit our largest companies, the middle market should be able to access our public markets at a competitive price.”

Jackson urged his fellow Securities and Exchange Commission members to consider adopting rules that would require more IPO cost disclosures and require bankers to justify the fees they’re charging.

“I think it’s high time to ask whether middle-market companies are paying too high a price for access to America’s capital markets,” he said.

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

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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