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

63 Pages Posted: 30 Sep 2019 Last revised: 10 Oct 2019

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

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Date Written: September 2019

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-a-vis investors to stay private longer.

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Suggested Citation

Ewens, Michael and Farre-Mensa, Joan, The Deregulation of the Private Equity Markets and the Decline in Ipos (September 2019). NBER Working Paper No. w26317, Available at SSRN: https://ssrn.com/abstract=3461485

Michael Ewens (Contact Author)

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

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National Bureau of Economic Research (NBER) ( email )

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Joan Farre-Mensa

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

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Chicago, IL 60607-7124
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