In November 2018, SIFMA published another primer in its recently introduced series on capital formation–this one titled “An exploration of the IPO process and listings exchanges”. The primer provides interesting statistics on IPO trends.

The primer notes the decline in the number of US listed companies.  The number of listed companies peaked in 1996 at 8,090, but is down to 4,336 at the end of 2017, or a 46 percent decline during this period.  The number of IPOs in 1996 was 860 and that was down to 173 in 2017. Deal value is also down from 1996 to 2017.  US IPOs represented only 10 percent of total global IPOs in 2017 but averaged 51 percent in the 1990s.  The decline in small cap IPOs (deal value less than $2 billion) also is well documented.  Small cap IPOs peaked in 2000 at 382, and reached a trough in 2008 with 37.  The average was 153 from 2000 to 2017, with a three-year average of 124.

The primer explores a number of theories underlying the decline in IPOs.  Among these, the primer cites the decline in equity research coverage.  Interestingly the number of research analysts has declined 10 percent from 2012 to 2016.  Budgets have declined 51 percent from 2008 to 2016 at the largest investment banks.  Whereas the average company with a market cap of $500 million or less used to have three to four analysts, now the number of analysts is down to one or two. While the last version of JOBS Act 3.0 would have required a study on research for EGCs, little attention has otherwise been directed to address the role of research coverage in the decline of smaller IPOs