WASHINGTON: Investors appear to be regaining confidence in the public markets based on new data compiled and analyzed by US securities regulators, Securities and Exchange Commission Chairman Elisse Walter said.
“For the first time since the financial crisis, the amount of money raised in public debt and equity offerings is rising — up 22 percent last year,” Walter told an audience at “The SEC Speaks,” an annual conference held in Washington by the Practising Law Institute.
“It’s important that we embrace a regulatory agenda that is consistent with continued growth in public offerings,” she said.
Policymakers in Washington have been grappling with how to boost participation in the public markets following the 2007-2009 financial crisis, which wiped out many peoples’ retirement savings.
In October 2011, the SEC’s Division of Risk, Strategy and Financial Innovation, or Risk Fin, announced preliminary findings from an ongoing study which showed that companies were increasingly relying on private offerings as a way to raise capital.
That spike in private offerings came as public issuances fell by 11 percent from 2009 to 2010, the division’s director Craig Lewis said at the time.
The latest data unveiled Friday, which is part of the same study, suggests that public offerings are now back on the rise.
In 2012, the amount of money raised in public offerings was essentially on par with the amounts raised in the private market. Collectively, both private and public offerings raised $ 2.4 trillion in 2012, up from $ 2 trillion in 2011, according to a fact sheet.
In response to the steep decline in initial public offerings following the crisis, the US Congress last year passed the 2012 Jumpstart Our Business Startups, or JOBS Act.
That law relaxes many securities laws in an effort to help smaller companies raise capital and eventually go public.
Walter told reporters on the sidelines of Friday’s event that it was too early to know whether the JOBS Act had an impact on the increase in public investments.
“I think if you want to try to determine the effect of the JOBS Act, we’re going to have to wait a while longer,” she added.
Some of the JOBS Act’s provisions went into effect immediately after the law was passed, including a provision that allows certain companies to submit initial public offering documents confidentially until just 21 days before they launch a road show and start soliciting interest from investors.
SEC officials in the Corporation Finance Division said around 150 companies so far have taken advantage of the new confidentiality provision.
Other provisions in the new law, however, require the SEC to write rules. In April last year, the SEC said companies were already starting to take advantage of the JOBS Act just a week after President Barack Obama signed it into law.
“Obviously if more capital-raising is going on, that is a sign of increasing investor confidence,” Walter told reporters. “It’s a good trend line in terms of what investors are feeling.”
Officials from Risk Fin plan to give a more detailed presentation on the study during the second day of “The SEC Speaks” conference.
However, Scott Bauguess, an assistant director within Risk Fin, gave reporters a few additional details.
Of all the public offerings studied, debt offerings represented about 75 percent of the total, he said.
Equities were a smaller fraction of public offerings, he said, and IPOs made up only about 5 or 6 percent of total equity raised in any particular year.
He said that the full study would be released in the coming weeks.
Reproduced with permission from Arab News