Our Capital Markets Series is composed of periodic reports and reviews on issues relevant and timely to today’s capital markets. Topics range from the current lackluster IPO market to a look at the capital markets structure.
Grant Thornton LLP Director of Capital Markets David Weild moderated Cushman & Wakefield’s CFO Roundtable event in Atlanta on October 7, 2011. In the Capital Market Series piece The tipping point: Is stock market structure causing more harm than good?, Weild and the panelists--Jeff Connaughton, Former Chief of Staff to Senator Ted Kaufman, Mark Grier, Vice Chairman, Prudential Financial, Inc. and Joseph Saluzzi, Co-founder, Themis Trading, LLC--share their thoughts on the current structure of the stock market and its historic function as a driver of job creation and capital formation.
Since 1991, the number of U.S. exchange-listed companies is down more than 22%, and when adjusted for real (inflation-adjusted) GDP growth, that percentage balloons to a startling 53%. Growth in a number of developing nations far outpaces that in the U.S. In fact, Asia’s listed-companies growth rate is even higher than its GDP growth rate. Grant Thornton LLP’s A wake-up call for America recommends solutions that address market structure issues and that, with thoughtful oversight, will advance the U.S. economy, create high-quality jobs, improve U.S. competitiveness, increase the tax base, and decrease the U.S. budget deficit — all without major expenditures by the U.S. government.
Grant Thornton’s updated U.S. IPO market study finds a dysfunctional market structure that fuels unemployment and undercuts small businesses. The new analysis, Market structure is causing the IPO crisis — and more, looks at how the IPO market structure drives job losses, and it addresses misconceptions about the impact of private equity, penny stocks and inflation on new public equity offerings.
The most important provision of the Jumpstart Our Business Startups (JOBS) Act is a little-known section titled “Other Matters — Tick Size” (Title I, Section 106(b)). In it, Congress requires the SEC to conduct a study on the “transition to trading and quoting securities in one penny increments, also known as decimalization... [and] the impact that decimalization has had on the number of initial public offerings since its implementation relative to the period before its implementation.” Produced by Grant Thornton’s Capital Markets group, The trouble with small tick sizes offers quantitative and qualitative evidence that decimalization — a euphemism for the collapse in trading spreads, tick sizes and commissions — decimated the U.S. IPO market when it began in earnest with the 1998 implementation of Regulation ATS.