Not long ago, the SEC hosted the Annual Small Business Forum.  The Forum provides an opportunity to consider a broad array of issues affecting private companies as well as smaller public companies seeking to raise capital and allows the public an opportunity to comment and suggest policy recommendations.  In the last few years, the SEC has not devoted much time to capital formation compared to other parts of its statutory mission.  That said, a number of the Commissioners took the occasion of the Forum to share their views on aspects of the capital markets that might require some attention.  For example, Commissioner Lizarraga diplomatically referred to “lively debate” regarding the “gap between capital raised in private versus public markets, and the possible risks and implications of this trend.”  Commissioner Uyeda noted that “the Commission can create a healthy ecosystem for entrepreneurs and investors” by encouraging a growing private market for capital.  The Commissioner noted that “[p]romoting economic growth, innovation, and jobs creation requires the side-by-side existence of vibrant public and private markets.  The Commission’s rules should not discourage companies from remaining private, especially if the rationale for such rules is that less disclosure equates to more fraud. Bad actors appear in both public and private companies and the Commission has anti-fraud rules and enforcement authority to address such behavior.”  However, many statements in the last year or two have, in fact, suggested that the growth of the private markets is reason for concern.  Commissioner Lizarraga in his comments noted that, “If the dominant model becomes billion-dollar unicorns being backed by many rounds of VC funding and then going public as mega cap companies, it would work against the goal of broad-based capital formation.” Commissioner Peirce provided some statistics to contextualize the issue:  she noted that the number of listed companies has dropped from a high of approximately 8,000 in 1996 to approximately 4,200 in mid-2022.  Both Commissioners Lizarraga and Peirce noted that scaled disclosure requirements and phased-in compliance can serve useful purposes.  Of course, Commissioner Peirce went a bit farther, noting that, “[a] Commission that wanted to see more companies in the public markets would reduce the barriers to going public and the costs of being public…. As to the latter, the Commission has resisted tailoring regulations so that small cap companies can better afford to participate in the public markets. The Commission brushes aside the need for scaling by explaining that the rule is so important that every public company, no matter its size, should bear the rule’s associated costs.”

While IPO activity has rebounded somewhat, market volatility remains high, and the market has been open principally for larger companies and in a few sectors.  In 2024, to date, 58 IPOs have been completed, which raised over $13.4 billion in capital.  The consumer goods, tech, and life sciences sectors lead the IPO market with $3.6 billion, $3.3 billion, and $3 billion raised, respectively. Notably, April saw flurry of activity, accounting for 38% of IPOs in 2024 and 40% of capital raised.