A More Concentrated Market Would Help IPOs

Nelson Griggs' Opinion Letter appeared in the November 28th edition of the Wall Street Journal.

Nelson Griggs' Opinion Letter appeared in the November 28th edition of the Wall Street Journal.

Small IPOs Are Dying; That’s Good” (Business & Finance, Nov. 14) overlooks the value that a healthy initial public offering pipeline has on the nation’s economic vitality. Even the “hand-wringing” economists know that keeping more of the economy private means excluding more Americans from participating in the markets and generating wealth. It is in America’s best interest that its brightest, most innovative entrepreneurs seek public offerings rather than private exits.

Furthermore, U.S. market structure hasn’t evolved to benefit all market segments equally. The current fragmented structure penalizes small companies for their low daily trading volumes; investors are deterred from making big bets on those companies because of the lack of liquidity to fill bigger trades. Concentrating disaggregated liquidity on one or two exchanges would allow investors to better source liquidity and make those stocks more attractive. Allowing issuers the choice to aggregate their liquidity on a single exchange—with limited exceptions—would result in better trading for the investors who believe in these companies.

A slowing IPO pipeline isn’t necessarily a sign of a more efficient market. Rather, it is evidence of a framework that discourages founders from taking their companies public for fear of succumbing to short-term pressures. Instead of celebrating the decline of the public market, we should be encouraging tax and regulatory reform, the elimination of unnecessary disclosure obligations and a broader review of current market structure which would allow CEOs to tap public markets without compromising on their companies’ futures.

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Please see the Nasdaq Revitalize page, where we make recommendations about improvements to the capital markets to promote growth, innovation, job formation and wealth creation. We welcome your feedback on our proposals to reduce burdens on companies with proxy reform, short sale disclosure, and tax, litigation & disclosure reform.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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