CHICAGO - (Business Wire) Over the last several years, the IPO market in the United States has practically disappeared. While conventional wisdom may suggest that the U.S. IPO market is going through a cyclical downturn exacerbated by the recent credit crisis, Grant Thornton LLP’s white paper,
Why are IPOs in the ICU?, explores a new and much darker reality.
The “perfect storm” created by technological, legislative and regulatory changes has undermined the proper functioning of the IPO market and the stock market in general. This has a large-scale effect on the capital markets:
- Lower U.S. economic growth.
- Entrepreneurs’ funding cut back.
- U.S. vulnerable to outside threats.
- Loss of American prestige.
- Capital markets infrastructure continues to erode.
- Individual investors left holding the bag.
- Issuers need to “get real.”
- Investment banks avoid money-losing research, sales and trading operations.
"The subversion of the IPO market threatens the American Dream," said David Weild, senior advisor to Grant Thornton Capital Markets.
Highlights of the white paper include:
| Is this what Congress really intended? |
| Winners | | | | | | | Losers |
| | | | | | | | Issuers |
| Hedge funds | | | | | | | Mutual funds |
| Trading-oriented institutions | | | | | | | Long-term institutions |
| Day traders | | | | | | | “Mom and “Pop” investors |
| Electronic trading | | | | | | | Stock brokers (Advice) |
| Electronic trading | | | | | | | Market makers (NASDAQ) |
| Volatility | | | | | | | Liquidityi |
| “Black pools” | | | | | | | Transparency |
| Expert networks | | | | | | | Company fundamental research |
| Private equity | | | | | | | Investment bankers |
| Big company acquirers | | | | | | | Venture capital |
| PIPEs, reverse mergers, SPACs | | | | | | | IPOs |
| Asia (especially China and India) | | | | | | | United States |
| i “Decimals and liquidity: a study of the NYSE,” The Journal of Financial Research, Vol. XVII, No. 1, Spring 2004, pp. 75-94. |
| “The results indicate that decimalization has led to a significant increase in volatility…” |
The white paper suggests that the United States needs an opt-in (by the issuer) capital market that provides the same structure that served the United States in good stead for so many years. This “Second Market” would be:
- opt-in,
- public,
- regulated,
- quote driven with quote increments at 10 and 20 cents, and
- broker intermediated.
To obtain a copy of Grant Thornton’s white paper, Why are IPOs in the ICU?, please visit www.GrantThornton.com.
About Grant Thornton LLP
The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.
In the U.S., visit Grant Thornton LLP at www.GrantThornton.com.
Grant Thornton LLP
Kristi Grgeta
T 312.602.8720
E Kristi.Grgeta@gt.com
