Facebook, The JOBS Act, and Abolishing IPOs

7 Pages Posted: 3 Oct 2012 Last revised: 2 Nov 2014

Date Written: October 1, 2012


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.

Keywords: capital markets, initial public offereings, IPOs, private markets, accredited investor market, two-tier market system

JEL Classification: K00, K22, K23

Suggested Citation

Pritchard, Adam C., Facebook, The JOBS Act, and Abolishing IPOs (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, Available at SSRN: https://ssrn.com/abstract=2155036 or http://dx.doi.org/10.2139/ssrn.2155036

Adam C. Pritchard (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

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