Fixing the US Capital Markets and US Entrepreneurship

The US public markets are dying. The number of US public companies fell by 46% from 1996 to 2016, despite the US economy having grown by nearly 65 percent on an inflation adjusted basis during the same period. Similarly, entrepreneurship in America is dying. The number of US entrepreneurs dropped at an alarming pace from 2006 to 2017 according to the US Census Bureau, despite the subject now being taught in US colleges and universities.

That both are dying is not coincidence. More US startups are failing because of two reasons:

  • lack of investment capital
  • the US public markets are inhospitable to smaller cap companies

As more startups fail, there are fewer to go public. Of those startups that do survive and do qualify to go public – many wait as long as possible before doing so because the US public markets are inhospitable to them. This explains why the number of US public companies has declined and the US public markets are dying.

As illuminated in my articles published by equities.com, https://www.equities.com/user/RonaldWoessner, this public markets inhospitability to smaller companies manifests as follows:

  • Smaller cap stock valuations versus S&P 500 stocks have been crushed by Sarbanes-Oxley
  • Smaller-cap stocks are illiquid
  • Institutional investors avoid investing in illiquid smaller cap stocks
  • Smaller-cap companies have little-to-no investment analyst coverage
  • Smaller-cap companies are starving for capital; the available capital is often “toxic”
  • Gaps in SEC “short” selling regulations enable short sellers unfairly to damage smaller-cap company valuations and the companies themselves

As more startups fail and fewer go public and with the US public markets being inhospitable to smaller companies, fewer Americans are willing to quit their jobs and become entrepreneurs. This explains why entrepreneurship in America is dying.

With fewer entrepreneurs starting new businesses and fewer public companies, GDP is lower and there are fewer jobs, especially for minorities.

The root cause of this pox on the US capital markets and economy and the recommended cure will be illuminated in my comments, appearing at  recently filed with the SEC in response to the SEC “Request for Comment regarding Market Structure Innovation for Thinly Traded Securities,” Release No. 34-87327 (File No. S7-18-19).  The comments appear at the link https://www.sec.gov/comments/s7-18-19/s71819-6671698-204008.pdf.

Thank you for your interest as we continue the struggle to keep the US public markets the world’s pre-eminent capital market and prevent the Chinese from overtaking America.

 

Going Public is an “On Ramp to Nowhere”​ for Smaller Cap Issuers

There has been much commentary about expanding the public company “on ramp” by making it easier for companies to go public. JOBS Act 2.0 made meaningful progress in that regard. Unfortunately, the U.S. public markets are an “on-ramp to nowhere” for many smaller-cap issuers because the public markets are inhospitable to smaller cap companies. Manifestations of this inhospitability are illuminated in a LinkedIn article appearing here, articles published by equities.com appearing here, and in my Response to Commission Statement on Market Structure Innovation for Thinly Traded Securities [Release No. 34-87327; File No. S7-18-19] published just TODAY by the SEC.

Quoting from slides 2 and 3 of the SEC filing:

  • As long as the view from the IPO “on-ramp” suggests that the prospects of taking on all the additional costs and risks of going public, but struggling to capitalize the benefits, many start-up founders, managers and investors will continue to think twice about choosing to finance their growth via the public market.
  • There are thousands of smaller-cap public companies, including OTC Markets issuers, that have the potential to create millions of jobs and grow GDP.
  • Many of these companies are “dying on the vine” because of their inability to access non-toxic capital and other inhospitable attributes of the US public markets.
  • Thousands of these issuers with the potential to grow, thrive and become vibrant NYSE or NASDAQ issuers and veritable job and GDP creation machines, NEVER will achieve that. Many will stagnate; others will go out of business … with the foreseeable result that the number of US publicly listed issuers will continue to decline, and one day there will be insufficient large cap issuers for Fidelity, Vanguard, large pension funds, etc. to invest in.

Read the entire filing at https://www.sec.gov/comments/s7-18-19/s71819-6671698-204008.pdf.

Thank you for your interest as we continue the struggle to keep the US public markets the world’s pre-eminent capital market and prevent the Chinese from overtaking America.

 

Ronald Woessner on Good Morning Texas law enforcement growing divide

July 14, 2016: WFAA-TV (ABC) “Good Morning Texas” Dallas, TX COPsync CEO Ronald Woessner and Trust 2 Protect Endorser/Former NFL DT Tommie Harris joined WFAA TV Dallas for a discussion on real solutions to bridge the growing divide between law enforcement and the communities they protect and serve, as well as how influencers such as athletes and celebrities are using Trust 2 Protect as a platform to help spread the word and unite communities.