Washington D.C. – U.S. Securities and Exchange Commission (SEC) Chairman Paul S. Atkins has outlined an ambitious agenda aimed at revitalizing America’s public markets by simplifying regulations and fostering increased capital formation. In recent remarks, Chairman Atkins articulated a vision to "Make IPOs Great Again," emphasizing the critical role of vibrant public markets in driving innovation, job creation, and broad-based economic prosperity. His initiative seeks to reverse a decades-long trend of declining public company listings by addressing regulatory burdens and modernizing the processes by which companies access public capital.
The core of Chairman Atkins’ strategy revolves around the SEC’s foundational mandate: to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. He asserts that a key component of fulfilling this mandate, particularly regarding investor protection and capital formation, is a greater number of publicly listed companies. This objective, he contends, is not only beneficial for businesses but also for the wider investing public, offering a tangible means for workers and savers to participate in the growth of American enterprise.
A Declining Landscape: The Shrinking Public Markets
Chairman Atkins highlighted a stark statistical reality: the significant decline in the number of publicly traded companies in the United States. Recalling his departure from the SEC in the mid-1990s, he noted that over 7,800 companies were listed on U.S. securities exchanges. Upon his return as Chairman a year ago, this number had fallen by approximately 40 percent. This contraction has led to a shift in the lifecycle of companies going public. Whereas in the 1990s, an Initial Public Offering (IPO) might have occurred around the equivalent of a Series B or C round of private funding, companies now often wait until much later stages, such as Series D or E, to consider public listing. This delay means that many companies are mature by the time they offer shares to the public, potentially limiting the upside for earlier investors and excluding a broader segment of the investing public from participating in their initial growth phases.
This trend is supported by academic research. Data from financial economists like Jay R. Ritter indicates that the median age of companies going public has increased significantly. While the median age was around eight years in the mid-1990s, it had risen to approximately twelve years by 2025. Similarly, studies show that the average time between a company’s first venture capital financing and its public debut has extended from roughly four years in the 1990s to seven years in more recent times. This extended private tenure allows startups to raise substantial capital privately, delaying their entry into the public markets.
Strategic Initiatives to Reverse the Trend
To counteract this decline, Chairman Atkins has prioritized dismantling perceived barriers that have discouraged companies from going public. While acknowledging that regulatory burdens are not the sole cause, the SEC under his leadership is actively identifying and proposing to remove regulatory frictions that may influence this decision.
Key Policy Actions and Proposals:
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Mandatory Arbitration Provisions: In September, the Commission issued a policy statement clarifying its stance on mandatory arbitration provisions in corporate governing documents. Previously, SEC staff had indicated, on an informal basis, that including such provisions could impede or delay registered offerings. Chairman Atkins’ policy statement reversed this "shadow position," affirming that, based on Supreme Court precedent, mandatory arbitration clauses are not inherently inconsistent with federal securities laws. This move underscores the SEC’s role as a disclosure-focused regulator, respecting a company’s chosen dispute resolution mechanisms within legal bounds.
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Reporting Frequency Reform: Earlier this month, the Commission proposed amendments that would offer public companies the option to file one semiannual report per year instead of three quarterly reports. This proposal aims to provide companies with greater regulatory flexibility, allowing them to tailor their reporting obligations to their specific industry, business model, and investor expectations, thereby reducing compliance burdens.
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Registered Offering Reform: A significant proposal, termed "registered offering reform," seeks to expand access to the SEC’s shelf registration process. This process allows public companies to access public markets rapidly and opportunistically. Currently, eligibility restrictions limit its use by newly public companies and smaller firms. The proposed reform would extend full shelf registration availability to nearly all public companies, including the newest and smallest, potentially increasing the number of eligible companies by 60 percent. Furthermore, it would grant offering and communication flexibilities, currently reserved for large, established public companies, to all listed companies, a change that could benefit an additional 200 percent of companies.
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Filer Status Reform: Concurrently, "filer status reform" proposes to recalibrate disclosure requirements based on a company’s size and tenure as a public entity. This would grant more companies relief from demanding SEC requirements, such as the auditor attestation of internal control over financial reporting. Currently, this benefit is mainly for newly public and smaller companies. The proposed reform would broaden this relief to approximately 81 percent of public companies, including certain seasoned and mid-sized issuers. It also aims to extend the "IPO on-ramp" provisions, which offer exemptions from certain requirements for emerging growth companies, allowing them more time to comply.
Modernizing the IPO Process: Addressing Persistent Challenges
Beyond these initial steps, Chairman Atkins indicated that the SEC is actively exploring further initiatives to modernize the IPO process itself. He cited ongoing work to rationalize, simplify, and update public company disclosure requirements, with a focus on materiality and ensuring that regulations elicit only information essential for reasonable investor decisions.
A persistent challenge identified by companies and advisors is navigating the "gun-jumping" rules under the Securities Act of 1933, which govern communications related to securities offerings. These rules, originally conceived in an era vastly different from today’s digital communication landscape, have become complex and difficult to maneuver. Chairman Atkins expressed a desire for reforms that would offer clarity, simplicity, and alignment with contemporary communication methods. He referenced the historical context where any "offer" before a registration statement became effective was prohibited, noting that while these rules have been eased over time, the current framework remains intricate. The last significant reform in this area occurred over two decades ago, prompting a need for a contemporary reassessment.
Exploring Alternative Paths to Public Markets
The revitalization effort also extends to examining alternative methods for companies to become public. While the traditional firm commitment underwriting IPO remains dominant, Chairman Atkins acknowledged the growing popularity of Special Purpose Acquisition Companies (SPACs) and other indirect routes. He stressed that instead of allowing companies to pursue these workarounds, regulators and market participants should focus on addressing the root causes and removing barriers to more direct public offerings.
Direct Listings: A Case for Re-evaluation
Direct listings, exemplified by Spotify’s 2018 debut, represent another area for potential regulatory adjustment. In anticipation of Spotify’s listing, the NYSE proposed amendments to its listing standards that would have eliminated the requirement for a concurrent Securities Act registration statement, relying solely on an Exchange Act registration statement. However, this aspect of the proposal was ultimately withdrawn, and the SEC-approved listing standards retained the Securities Act registration requirement. Nasdaq’s standards for direct listings also mandate a Securities Act registration.
Chairman Atkins raised pertinent questions regarding the necessity of a Securities Act registration statement for direct listings, particularly in light of a unanimous 2023 Supreme Court decision in Slack Techs., LLC v. Pirani. This decision may have altered the landscape for establishing Section 11 liability claims for investors in direct listings. He questioned whether the market truly perceives a meaningful investor protection benefit from a Securities Act registration in this context, or if it serves as a hindrance to companies considering direct listings. He also inquired about other potential regulatory frictions that the SEC could address through rulemaking or guidance to facilitate direct listings while preserving investor protections.
A Call for Innovation and Collaboration
Chairman Atkins concluded by emphasizing that the SEC is actively seeking bold and creative ideas from founders, executives, investors, bankers, lawyers, and other market participants. The agency has opened a public comment period to gather input on modernizing IPOs, improving communication rules, and identifying roadblocks to non-traditional public listing methods. While a deadline of July 27th was mentioned for initial submissions, the SEC stated it would continue to consider comments received thereafter.
The SEC’s commitment to listening and acting upon these submissions signals a concerted effort to foster a more dynamic and accessible public capital market in the United States. The initiatives championed by Chairman Atkins represent a significant step towards re-energizing the IPO market, which he believes is crucial for sustained economic growth and broad-based prosperity. The success of these efforts will hinge on the SEC’s ability to implement meaningful regulatory changes that balance investor protection with the imperative to encourage capital formation and innovation.
