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MORE ROOM IN PRIVATE MARKETS

September 3, 2018

 

THE LITTLE GUY'S FOOT IS IN THE DOOR.


U.S. Securities and Exchange Commission wants to make it easier to invest in private companies. Chairman Jay Clayton believes that more individual investors should have a shot at companies that have avoided going public for years. New rules changes will allow mom-and-pop investors to rip the rewards of the big guys. Top-line players have made billions of dollars investing in start-ups with very little pain. Buying on the inside at bargain prices and selling their holdings into the public markets at outrageous premiums – usually sticking the little guy was the noise.


Under Clayton, a Donald Trump appointee, the SEC has taken steps to relax rules for issuers, including allowing firms going public to file information confidentially, and is currently discussing easing other compliance rules. “The private markets are awash in capital these days,” he said at a conference in Nashville. ‘The question is, who is participating.” 


Private securities are generally off the radar of federal regulators. Less information is typically available about the firms, increasing risks for investors. The well-capitalized firm with highly developed research can better access the reward-risk ratio and profit by timing and useful information. To level the playing field, the SEC plans to issue a “concept release” – that will seek public comment on how to revamp the capital raising process, including requiring disclosure of detail information and confidential data given to the more prominent firms.  We have big idea on the subject but will wait and see what the SEC has to offer.


Indeed, if more retail investors get access to companies before they launched an initial public offering, the move would create more bottom line wealth. 


In the U.S., more than $.7 trillion was raised in 2017 via private stock and debt sales. This year, 158 companies had gone public on U.S. exchanges, raising $43 billion – up 36% from in 2017, when 112 companies raised $31.6 billion, according to our SPM research. 

 

Good work, Mr. Clayton

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