Working Paper: NBER ID: w26317
Authors: Michael Ewens; Joan Farre-Mensa
Abstract: The deregulation of securities laws|in particular the National Securities Markets Improvement Act (NSMIA) of 1996|has increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an IPO market failure. Rather, founders are using their increased bargaining power vis-a-vis investors to stay private longer.
Keywords: Private Equity; IPOs; Deregulation; Venture Capital; NSMIA
JEL Codes: G24; G28; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| NSMIA (G24) | trend of startups remaining private longer (L26) |
| founders' control (G34) | IPO decisions (G24) |
| NSMIA (G24) | late-stage startups' likelihood of raising capital from out-of-state investors (G24) |
| NSMIA (G24) | late-stage startups' ability to raise large funding rounds (M13) |
| NSMIA + state-level regulations (non-uniform blue sky laws) (G18) | capital raising for late-stage startups (G24) |