During the doctom bubble, companies were going public left and right.
But in the last decade, there's been a decline in IPOs as a result of regulatory changes and a variety of other factors, Andreessen Horowitz Managing Partner Scott Kupor writes on Marc Andreessen's blog.
Those changes, Kupor says, have prevented "ordinary investors from getting in on the wealth creation, and hampers the creation of middle class jobs."
Startups are waiting longer to go public, and raising more venture capital than before. Based on how the investment environment is set up, Kupor argues that it favors venture capitalists and harms ordinary investors.
Kupor points to how when Microsoft went public in 1986 at a relatively low $500 million market cap, average Americans who purchased stock at its IPO eventually saw a return of 500x.
But with Facebook, which went public at a $100 billion market cap, Americans who bought stock at Facebook's IPO will likely not see a 500x return.
That's why Kupor says the government needs to make small capital IPOs more appealing to regular investors. It could do this by going back on its decision to "decimalize" the stock market, Kupor says, which essentially killed the profits from trading small-capitalization stocks.
Doing so would "increase liquidity and reduce volatility for small-cap stocks, shocking the small-cap IPO market back to life and breaking the shackles that are holding the middle class," Kupor writes.
If IPOs in the United States hadn't dropped in the last decade, the Kaufman Foundation estimates the U.S. would have created 1.9 million new jobs.
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