Economic Idea 9: Free IPOs - Have the government pay for the fees of IPOs and DPOs - Boost the number of IPOs by 2,000 per year - Create 5 million more jobs in 5 years time - Create $100 billion per year of new tax revenues in 5 years time
Introduction-----
How much does it cost to be a public company?
The cost of being public includes certain one-time costs as well as recurring costs. Typically, private companies incur more than $1 million in one-time costs to become public companies. Around 60% of respondents spent more than $1 million per year on recurring costs of being public.
How long does it take for a company to go public?
It can last between two weeks and three months, depending on the company and its advisors. If handled properly, it should take an average company between six and nine months to go public via an initial public offering (IPO) or direct public offering (DPO) - if it is coordinated and managed properly.
How much revenue do you need to go public?
For public investors, the rule of thumb for scale is around $100 million in revenue. There are exceptions of course; this number is more of a desired threshold than a clear line. It gives investors a sense of comfort around the number of years it'll take for the company to actually attain $1 billion in revenue.
Who gets the money when a company goes public?
The money from the big investors flows into the company's bank account, and the big investors start selling their shares at the public exchange. All the trading that occurs on the stock market after the IPO is between investors; the company gets none of that money directly.
Can a small business go public?
Small-business owners of any size can now use direct public offerings (DPOs) to sell ownership stakes in their company to raise capital, without the tight securities rules of an initial public offering (IPO). But is it a legitimate move for your small business?
Advantages of IPOs
The primary benefit of going public via an IPO is the ability to raise capital quickly by reaching a large number of investors. A company can then use that cash to further the business, be it in the form of research, infrastructure, or expansion.
How many companies went public in 2018?
A total of 191 companies went public in 2018, raising $46.8 billion.
How many jobs are created per IPO?
About 82,000 jobs have been added by the 454 U.S. companies that completed initial public offerings under the Jumpstart Our Business Startups Act, an increase of roughly 30% from their pre-IPO head counts, according to public filings analyzed by The Wall Street Journal. U.S. private-sector employers broadly have added 7.4 million jobs since April 2012, a 6.6% increase. Also see here for the article.
Proposal-----
The costs, including fees for going public initially with an IPO can be $1 million per company, for DPOs (Direct Public Offerings), several $10,000ds per company.
What if the government pays these fees so it becomes costless for companies to do IPOs and DPOs. For example, we boost the number of IPOs from 191 companies in 2018 to 2,000 companies per year or even 10,000 companies per year in 5 years time.
Then it costs the government 2,000 * $1 million = only $2 billion per year.
What are the results?
Companies that recently went public increase their employees by 200 on average in 3 years time, and by 500 in 5 years time. So if 2,000 companies go public each year, we can expect to produce 1 million more jobs per year or 5 million more jobs in 5 years time.
These 5 million more jobs produce at least $20,000 per year of more tax revenues (employment taxes + savings on unemployment benefits and welfare benefits). So they produce $100 billion per year of new tax revenues, and our cost is only $2 billion per year, so we make our money 50x fold back!
It could be that 10,000 companies go public each year, when the cost of doing an IPO is covered by our government, then we produce 5x times as many jobs, or 5 million jobs per year, or 25 million jobs in 5 years time. And we produce $500 billion per year of new tax revenues. The cost is then only $10 billion per year for our government to pay for the IPO fees of 10,000 companies per year.
This is awesome! An idea for President Trump to jumpstart our economy!
