After killing off the small IPO with nefarious rules that are little recognized for their pernicious behavior, the Congress passed the JOBS Act with the hope of jump-starting the small IPO. While we await regulations from the SEC – and the early indications have not been promising – there seems to be some progress being made. A set of JOBS Act rules quietly promulgated last week once again allow analysts to attend pitch meetings, at least for “emerging” IPO candidates (companies under $1B in revenues - the small IPOs). This had been the common practice until Elliott Spitzer forced a settlement in 2003 with the 11 large investment banks. It is unclear if the new rules only work for the rest of the investment banks, not the big 11. Still, progress.
Now, if we could only reinstate wider spreads for small IPOs. The regulatory change to decimalization in 1998 (where the spread got pushed to 1c from 12/5c) crushed the small investment banks and squeezed them out of the market. What has replaced them are trading ‘bots with high-frequency-trading. We went from investment to speculation.
Serendipity: Violin Memory just filed for an IPO under the new JOBS Act rules which allow it to keep its information secret until three weeks prior to the roadshow. The IPO is expected to go out around a $2B valuation. This comes on the tail of Workday, which had a successful IPO, popping 73% on the first day. Green shoots after Faceplant?
