The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board, which keeps piling on more and more accounting requirements. A public company requires an expensive army of lawyers and accountants to comply with disclosure and accounting rules and if the company gets any of this wrong, it is subject to strike suits or hostile hearings in Congress.
Moreover, the growth of private equity funds (fueled by investments from pension plans for state and local government workers) provides a ready path for promising private companies that wish to stay private to sell their shares to such funds rather than pursuing an IPO.
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As with so many other issues, common sense policies to restore the vibrancy of U.S. public stock markets are readily available. The SEC must remove the regulatory uncertainty surrounding SPACs, including reforming them if necessary, and reduce the disclosure and accounting burdens on all public companies to bring down the high cost of being a public company.
These steps will encourage successful private companies to access the public markets for capital to build their businesses and give everyday Americans the chance to invest in those innovative companies.
Norm Champ is a former director of the Division of Investment Management at the U.S. Securities and Exchange Commission and author of “Going Public: My Adventures Inside the SEC and How to Prevent the Next Devastating Crisis” (McGraw-Hill 2017).
