The Deregulation of the Private Equity Markets and the Decline in IPOs

Review of Financial Studies, Forthcoming

94 Pages Posted: 15 Aug 2017 Last revised: 10 Feb 2020

See all articles by Michael Ewens

Michael Ewens

California Institute of Technology - Division of the Humanities and Social Sciences; National Bureau of Economic Research (NBER)

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: February 7, 2020

Abstract

The deregulation of securities laws—in particular the National Securities Markets Improvement Act (NSMIA) of 1996—has increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an IPO market failure. Rather, founders are using their increased bargaining power vis-à-vis investors to stay private longer.

Keywords: Deregulation, NSMIA, Initial Public Offerings (IPOs), Venture Capital, Private Equity, Founder Equity

JEL Classification: G24, G28, G32

Suggested Citation

Ewens, Michael and Farre-Mensa, Joan, The Deregulation of the Private Equity Markets and the Decline in IPOs (February 7, 2020). Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3017610 or http://dx.doi.org/10.2139/ssrn.3017610

Michael Ewens (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
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National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

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