As Congress battles over the shape of financial reform, will it address the lack of a properly functioning market structure? The market for underwritten IPOs, given its current structure, is closed to 80% of the companies that need it. In fact, since 2001 the U.S. has averaged only 126 IPOs per year, with only 38 in 2008 and 61 in 2009 — this compared to the headiness of 1991–2000 with averages of 530 IPOs per year. Companies can no longer rely on the U.S. capital markets for an infusion of capital, nor can they turn to credit-strapped banks. The result? Companies are unable to expand and grow — they are unable to innovate and compete — so they are left to wither and die, contributing to today’s high unemployment rate. During the time since our first studies were released, Grant Thornton has received a number of intriguing questions. This post (and the report posted after the jump) addresses them and presents updated data through December 2009, while examining the continued lack of a properly functioning IPO and small cap stock market. The systemic failure of the U.S. capital markets to support healthy IPO and robust small cap markets inhibits our economy’s ability to innovate, create jobs and grow. At a time when America is struggling with double-digit unemployment, the failure of the U.S. capital markets structure can no longer be ignored.
In one of the many memorable lines from Caddyshack, Chevy Chase’s character instructs his caddy, “Danny, see your future, be your future.” This quote helped inspire me to start my own business, seek out my wife, purchase my dream log home in the woods of the Poconos and, on a micro level, to write this column. It has been said that we are the sum of all of our thoughts and, consequently, all of our successes start in our imaginations. This meme also is the underlying theme in every successful VC-backed company. It can be found in every investment banking pitchbook. It is in the private placement memoranda of every PE and VC firm looking to raise investment capital. It drives the corporate culture of firms like Apple, Google, Cisco, Microsoft and GE as they strive to create a better world. It lives in the hearts and minds of every NBA champion and World Cup soccer player.
In the wake of the financial crisis that began in 2008, nearly every developed country has discussed and proposed heightened regulation for managers of pooled investment vehicles—primarily hedge funds, but also private equity funds, venture funds and real estate funds. Notwithstanding that there is ample room for debate as to whether the activities of those managers contributed to or exacerbated the crisis and whether more stringent regulation could have prevented it, legislators and regulators are capitalizing on current popular support for governments to “do something.” Perhaps the most aggressive proposals have come from the European Union, in the form of the EU Alternative Investment Fund Managers Directive. The Directive’s professed objectives are investor protection, market integrity and stability, the prevention of systemic risk, the elimination of “social externalities” (whatever that means), domestication of non-EU based funds and taxation of such funds’ revenues—quite a tall order. The Directive is filled with references to “orderly markets,” with not one use of the phrase “efficient markets.”
When you are an entrepreneur trying to build a product at a startup, you are in a pretty risky place. Usually you are not generating cash flow, you don’t yet know exactly which features are going to be required by the marketplace and you aren’t yet sure how you are going to market/sell the product […]
The news headlines are grim. Oil spills, sovereign defaults, choppy stock markets. tepid employment. It’s no wonder that the global capital markets seem spooked. Yet, here’s the strange thing, many of us in the technology sector have never been more bullish about what lies ahead. It’s like a tale of two cities. Wall Street and […]
Allegis Capital conducted its annual Limited Partners meeting May 12 and 13th in Half Moon Bay, Calif. We do this every year to allow our investors a chance to meet and greet our CEOs and see how their companies are progressing. We also want our CEOs to have a chance to network with the people […]
Private equity funds considering exit alternatives for their portfolio companies may want to take a close look at the structure of 57th Street General Acquisition Corp., a new special purpose acquisition company that went public at the end of May. This new SPAC includes a number of changes to the traditional SPAC structure designed to address concerns expressed by potential sellers of companies or assets to SPACs. As a result, it may offer a desirable exit strategy for PE funds and other sellers.
Almost one year ago I wrote a wildly popular Idiot CEOs article that highlighted my affection for the crucial role of visionary CEOs at early stage companies, and how instead they are foolishly made/forced to believe that the directives from the company’s board (mostly VCs) will guide them to success. That article was meant to […]
If you sell your company, you’d assume the lawyers who helped you with the deal would still be able to assist you with any issues that might come up after closing, right? Not so fast. The reality may surprise you. In most mergers, the law firm technically represents the target company rather than the selling stockholders. […]
I swore I would go offline for much of Memorial Day Weekend. But I cheated and peeked at my email late Saturday afternoon and discovered an email from a friend saying, "I'm surprised to see you take such a public stance on the capital gains tax rates," with a link to a New York Times article on the topic. I read the article in The New York Times on the carried interest debate and was shocked to see my name and a reference to me that read:
"As the Senate Democrats sent signs that they were open to a tax increase, investors and their lobbyists mobilized quickly, warning that the proposal could stifle investments that create jobs. A group of 80 venture capitalists traveled to Boston to urge Senator John Kerry and Representative Barney Frank, Democrats of Massachusetts, to exclude their business from the tax change, according to Jeffrey Bussgang, a partner at the Boston venture capital firm Flybridge Capital Partners."
Um...here's the problem. I never spoke to the reporter, David Kocieniewski, who wrote the article (although I later found a voice mail from him). Other than the fact that my name and firm name are accurate, nothing else in that sentence is correct.