Rethinking the IPO Bureaucracy
53 Pages Posted: 4 Dec 2024 Last revised: 27 Nov 2024
Date Written: November 26, 2024
Abstract
SEC staff have been pre-screening virtually all IPO disclosures for over 90 years. This regulatory review typically adds about five months to the IPO timeline and includes at least four rounds of agency “comment letters,” issuer responses, and amended filings.
This paper critically analyzes the IPO comment letter process in three stages (1) an economic analysis that highlights its uncertain benefits and high costs; (2) a comparative historical analysis that shows how the institutional weaknesses that originally necessitated government pre-screening have disappeared over time; and (3) a political economy analysis that explains the persistence and expansion of governmental role in the IPO process through the lens of public choice rather than public interest.
Based on this analysis, I propose abolishing the IPO bureaucracy.
My goal is to offer a new direction for IPO reform. Hundreds of SEC staffers are standing on the “IPO On-Ramp,” blocking, slowing, and directing traffic. I believe it is time for them to get off the ramp and let cars drive.
Keywords: Securities Regulation, SEC, Securities and Exchange Commission, IPO, Initial Public Offering, Corporation Finance, Comment Letter
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