If we want growing companies to go public, we need our public markets to be a competitive source of growth capital. One easy solution is to let public companies sell their shares in the same way they can now buy them back: through brokers directly into their established public markets. Removing the outdated restrictions on selling shares publicly will lower the cost of capital and attract more growth companies to our markets.
The Senate recently held a confirmation hearing for Jay Clayton, President Donald Trump’s choice to head the Securities and Exchange Commission. I used this opportunity to raise the important question: why do most fully SEC reporting companies still raise all their capital privately?
Restrictions on access to capital through the public markets is a problem we need to solve. A simple solution is to allow public companies to sell their shares as easily as they can buy shares – through brokers directly into their established public markets.
Many companies are currently forced to turn to private offerings to sell their shares – often at a sizable discount – rather than deal with the red tape of a public offering. For smaller companies this often leads to negative terms and toxic financings.
A Need for Simple Regulatory Changes
Simple regulatory changes could make it possible for companies to sell shares into the public markets:
- Streamline and broaden existing shelf regulations rules to cover all SEC reporting companies
- Eliminate the need for public companies to file “supplemental registration statements” when selling authorized shares into the market, and expand the safe harbor rule to include all legally authorized shares
- Allow brokers to execute orders to sell shares directly from the issuer without the burden of underwriting obligations
SEC reporting is the best continuous disclosure system in the world, and we should use its strengths to modernize our markets. With modest rule changes, the U.S. public markets can provide an essential source of growth capital for innovative and entrepreneurial companies. We will all benefit from more efficient capital formation.
You can read the complete Op Ed featured in Bloomberg View: “Give Companies Easier Access to the Public Markets”
If you would like to get involved in helping push these regulatory changes forward, we encourage you to write to your representatives in Congress to ask for their support.