U.S. Rep. Tom Emmer (R-MN) introduced bipartisan legislation that seeks, among other things, to encourage more Initial Public Offerings (IPOs).
The Main Street Growth Act, H.R. 6623, is designed to improve capital formation, encourage more IPOs, and create jobs. It would do this by allowing the U.S. Securities and Exchange Commission (SEC) to provide for the creation of venture exchanges, which will foster an active and liquid secondary trading environment for small and emerging growth companies to access the capital they need to grow.
These exchanges will have the effect of encouraging more early-stage IPOs, which, in turn, will enable retail investors to invest in early-stage, high-growth companies that were previously restricted to accredited investors.
“When businesses go public, jobs are created and new centers of wealth are formed. However, IPOs are on a steep decline, which means more exciting investment opportunities are reserved for accredited investors instead of everyday Americans,” Emmer said. “Recognizing the continued challenges we face in courting new IPOs, and, understanding that liquidity is key for small companies interested in going public as well as securities currently trading in the marketplace, it is clear that we must take steps to better tailor our markets in order to account for the varying size and nature of potential public companies if we are to encourage new capital formation.”
While there was an historic rise in IPOs in 2020 and 2021, participation in the IPO process has slowed dramatically over the last few decades. The number of IPOs declined significantly from the 1990s to the 2000s and remained relatively flat throughout the 2010s. Further, the number of small IPOs, those under $100 million, has declined significantly.
“California’s 19th Congressional District is home to many transformative small businesses that too often find access to existing capital markets limited,” said U.S. Rep. Jimmy Panetta (D-CA), who c0-led the bill. “The bipartisan Main Street Growth Act would empower the federal government to create specialized venture exchanges, critical to getting the capital these fledgling businesses need to grow and thrive. Small businesses are the backbone of our economy and essential to fostering the future innovation we’ll need to stay ahead, and I’ll continue working to ensure they have a strong foundation for success.”
The Main Street Growth Act was approved by the U.S. House of Representatives in 2018 but did not make it past the Senate.