Facebook, The JOBS Act, and Abolishing IPOs
Adam C. Pritchard
University of Michigan Law School
October 1, 2012
Regulation, Vol. 35, No. 3, 2012
U of Michigan Law & Econ Research Paper No. 12-020
U of Michigan Public Law Research Paper No. 293
The market for initial public offerings (IPOs) — the first sale of private firms’ stock to the public — is notorious for its swings from peaks to valleys. This paper argues that these swings reflect serious flaws in the IPO scheme, and that U.S. capital markets should move toward a more stable alternative. Specifically, this paper argues for a two-tier market system in which new stock issuers initially participate in a less-regulated private capital market of accredited investors and then, if they choose, they can move to a more regulated, broader public market. Likewise, firms currently participating in the public market can choose to move to the accredited investor market. Such a scheme would harness private markets to promote the public good while simultaneously eliminating the public bad of IPOs.
Number of Pages in PDF File: 7
Keywords: capital markets, initial public offereings, IPOs, private markets, accredited investor market, two-tier market system
JEL Classification: K00, K22, K23Accepted Paper Series
Date posted: October 3, 2012 ; Last revised: October 16, 2012
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