The Jumpstart Our Business Startups Act (JOBS Act) was signed into law five years ago this week with hope that removing burdensome disclosure requirements and encouraging the use of crowdfunding tools would spur new business startups to eventually grow into large public companies.
The Financial Executive Research Foundation, in partnership with Donnelly Financial Solutions, is preparing to publish a whitepaper this month on the JOBS Act, whether is has changed the IPO market and how the law could change in the next five years.
In this second podcast on the subject, we speak with Professor Reena Aggarwal, Director of Georgetown University’s Center for Financial Markets and Policy. Dr. Aggarwal, specializes in capital raising, initial public offering and corporate governance, discusses what lessons financial executives should learn regarding the first five years of the JOBS Act.
Financial Executives Research Foundation: Thanks very much, Dr. Aggarwal, for joining us today. How would you describe the IPO market today versus when the JOBS Act was created in 2012?Dr. Reena Aggarwal: If you try to look back to what was happening before the JOBS Act, we had gone through this terrible financial crisis, and in 2008, '09, '10, '11, the IPO market was looking terrible, whether you look at the proceeds or you look at the number of IPOs.
There was a lot of pressure to think in terms of "How do we get economic growth going? How do we create jobs?" Access to capital was a big issue at that time. That formed the basis for creating the JOBS Act.
Part of the criticism at that time was that since Sarbanes-Oxley had been implemented the market was concerned that IPOs were not taking place partly because of regulation. It was felt there was too much regulation in the post-Sarbanes-Oxley world.
We had the post-Sarbanes-Oxley world, then we had the financial crisis, and there was a lot of thinking on "How do we make capital available?" In that terrible four or five-year period for the IPO market, the JOBS Act emerged.
Here we are, 2017, and the IPO market has seen ups and downs.
2016 was not a good year. It looked pretty bad based on all kinds of metrics. Now we're in 2017. I must say I feel a lot more optimistic now.
Recently, we've had the Snap IPO. The Snap IPO, obviously has its corporate governance issues, but in some way, I was...