CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

WHY HAVE WE SEEN A SLOWDOWN IN IPOS AND WHAT COULD 

DRIVE AN INCREASE?

May 10, 2017
CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

The Number of Public Companies Has Declined by Close to 50%

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Source: World Bank.

Note: Includes SEC registered companies on a U.S. public exchange.

Number of Public Companies

7,487 

8,090 

7,905 

7,499 

7,229 

6,917 

6,177 

5,685 

5,295 5,226 5,145 5,133 5,109 

4,666 

4,401 4,279 4,171 4,102 4,180 

4,369 4,381 4,331 

 -

 1,000

 2,000

 3,000

 4,000

 5,000

 6,000

 7,000

 8,000

 9,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

IPO Trends

Number of IPOs

3

Source: Dealogic.

Note: Includes SEC registered IPOs. Excludes BCCs, SPACs and closed end funds.

IPOs Less Than $100 Million Market Cap as a % of Total IPOs

The number of IPOs 

has declined 

materially from their 

pace prior to 2000

Small cap has 

become a smaller 

percentage of total 

IPOs

553

812

597

377

534

429

92 86 83

244

209 208 221

34

63

163

130 136

219

281

155

99

48

0

100

200

300

400

500

600

700

800

900

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

52.1%

49.1%

46.1%

35.8%

12.4%

5.8%

14.1% 15.1%

9.6% 9.0%

12.4% 10.6%

5.9%

11.8%

4.8%

9.8%

6.2% 4.4%

7.3% 8.2%

11.0%

13.3%

2.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

Factors to Consider

• Rise of private equity

• Regulatory environment

− The JOBS Act has been a homerun for emerging growth company IPOs

− Stifling regulatory environment

− Expense burden of being public

• Costs / requirements of being a public company

− Time to liquidity

− Market risks

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CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

What is Needed for a Favorable IPO Market?

• A healthy IPO market requires a confluence of:

− Favorable Market Trends and Valuation Levels

− Favorable Regulatory Environment

− Post Deal Sponsorship

• Getting public is half the battle

• Research support is essential to provide information flow to investors

• Trading support is essential to provide liquidity to investors, particularly for illiquid small cap companies

• As of 2012, nearly 29% of exchange listed companies had no meaningful research coverage

− This is most concentrated in sub $250 million market cap companies, where the lack of coverage is 

north of 50%

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CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

Issues to Consider to Make Public Markets More Attractive

• JOBS Act

− Major positive for emerging growth companies

− Limited evidence to support that Regulation A offerings are gaining traction

− Based on our findings, there have been 171 Regulation A offerings filed(1)

− Based on our findings, companies that have raised public capital through a Regulation A offering have not 

developed a robust trading market for their stocks on U.S. public exchanges

• Sponsorship post deal – Essential to the success of an IPO

− Role of sell side research continues to be eroded

• More junior talent

• Restricted roles on underwritings

• More short term focus

− Regulations (current/pending) are damaging the model for the firms that focus on small/mid cap companies

• Glass-Steagall 

• Decimalization

• Global settlement

• Tying

• Desk commentary

• MiFID

• Regulatory burden is impeding information flow

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(1) Source: Morrison I Foerster. Data through December 2016.
CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

Reg A Company Comp Group(1)

Ticker --- ---

Pricing Date --- ---

Offer Price $12.00 $15.00

Market Cap

($mm) 270.8 255.5

Offering Method Regulation A Traditional IPO

% Change Price 

Offer / Current (47.9%) 24.8%

Research NA 5

ADTV Since 

Pricing 6,899.7 106,628.2

(150.0%)

(50.0%)

50.0%

150.0%

250.0%

350.0%

450.0%

2/19/2016 4/19/2016 6/19/2016 8/19/2016 10/19/2016 12/19/2016 2/19/2017 4/19/2017

Regulation A Company Example

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Source: FactSet.

Note: Price performance as of 5/8/17.

(1) Includes the median of 35 U.S. companies that completed an IPO since 2015 with a market cap between $200 million and $350 million.

$17 Million

2016

Regulation A 

Offering

Price Performance Since Offering

• This Company completed a 

$17.0 million capital raise 

through a Regulation A 

offering

• The Company’s shares 

launched and began to 

trade on a public 

exchange

• A search of Regulation A 

companies discloses this 

Company as one of the 

most successful in 

developing an active 

trading market for its stock 

in U.S. public markets

Reg A S&P 500 Dow Jones NASDAQ

(47.9%) 25.1% 28.2% 35.5%
CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

Key Takeaways

The mission of the SEC is to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation

• Suggested areas of focus:

− “Protect Investors”

• Decline of equity research platforms and lack of small cap coverage is not a positive for investors or small/mid cap IPOs

− “Fair, Orderly & Efficient Markets”

• Tying is rampant – which, is illegal and anti-competitive

− Larger lenders continue to gain share at the expense of firms that are dedicated to small and mid cap companies

• Continued concentration of market share in the allocation of capital will ultimately limit the ability of smaller investors to 

participate

− “Capital Formation”

• JOBS Act has been great

• Unsure Regulation A will create “successful” public companies

• Continued efficiency and cost improvements are needed

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CONFIDENTIAL AND PROPRIETARY INFORMATION OF STEPHENS INC| MEMBER NYSE, SIPC 

Disclaimer

The foregoing material was prepared for informative purposes only and is not an offer to buy or sell any securities. The foregoing material is not 

intended to recommend the purchase or sale of any securities or to provide information on which an investment decision to purchase or sell any 

securities could be based. Information contained in the material was obtained or derived from sources considered reliable, but has not been 

independently confirmed or verified. The foregoing material does not purport to contain all of the information that may be required to evaluate all 

of the factors that would be relevant to any person considering entering into a transaction, and no representation is made that the information is 

accurate or complete. Any person considering entering into a transaction should conduct its own investigation and analysis and should consult 

such person’s own professional advisors. Stephens and its directors, officers, employees, affiliates and representatives expressly disclaim any and all 

liability based, in whole or in part, on any such information, errors therein or omissions therefrom. Stephens is not a legal advisor, accounting advisor 

or tax advisor. Nothing in the foregoing material is intended, or should be construed, as legal, accounting, regulatory or tax advice. Any discussion 

of tax attributes is provided for informational purposes only, and each recipient should consult such recipient’s own tax advisors regarding any and 

all tax implications or tax consequences of any investment or any other transaction or course of action.

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