All Stick and No Carrot? Reforming Public Offerings

32 Pages Posted: 28 Oct 2022 Last revised: 11 May 2023

See all articles by Stephen J. Choi

Stephen J. Choi

New York University School of Law

Adam C. Pritchard

University of Michigan Law School

Date Written: October 24, 2022


The SEC heavily regulates the traditional initial public offering. Those regulatory burdens fuel interest in alternative paths for private companies to go public, “regulatory arbitrage.” The SEC’s response to the emergence of alternatives, most recently SPACs and direct listings, has been to suppress them by imposing heightened liability under Section 11 of the Securities Act. The SEC’s treatment of the traditional IPO regulatory process as a one-size-fits-all regime ignores the weaknesses of this process, in particular the informational inefficiency of the book-building process. In this essay we argue that the agency’s focus in regulating issuers going public should be on promoting market pricing driven by sophisticated investors with access to credible disclosure. We propose an alternative approach that provides issuers with a clear choice in going public: 1) provide disclosures for a seasoning period prior to listing their securities for public trading, with corresponding reductions in regulatory requirements for going public (the “carrot”); or 2) impose heightened liability on company’s going public without a seasoning period, not only for registration statements, but also for the company’s periodic disclosures released during a post-offering seasoning period (the “stick”). We argue that such a regime would push issuers to maximize the joint welfare of both issuers and investors.

Keywords: public offerings, direct listings, SPACs

JEL Classification: K22; G38

Suggested Citation

Choi, Stephen J. and Pritchard, Adam C., All Stick and No Carrot? Reforming Public Offerings (October 24, 2022). NYU Law and Economics Research Paper No. 23-14, U of Michigan Law & Econ Research Paper No. 23-022, Available at SSRN: or

Stephen J. Choi

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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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