One VC who’s aware of it, Pascal Levensohn, says that he was “shocked” when he learned of the contents.
“It has really scary statistics about the secular decline in market share, globally, that all listed markets in the U.S. have been experiencing since 1997,” says Levensohn, founder and managing director
The study is co-authored by David Weild, a former vice chairman of Nasdaq, who also co-authored another study by Grant Thornton called “Market Structure Is Causing The IPO Crisis,” which was released last month.
Weild says that he became concerned about the health of U.S. markets after watching the “massive volatility” created by bubbles, specifically the dot-com bubble, while he was working at Nasdaq from 2001 to 2004.
“I was sitting in an executive committee meeting…and we were delisting companies like mad,” he says. “I had to change the rules not to delist so many. I felt like I was running on a tread mill. I said, ‘We’ve created this incredible delisting machine and companies can’t get out of their way. There’s something wrong about this.’”
The dot-com bubble was not a listings bubble, Weild says.
“It was a valuation bubble in a narrow industry group that left out the rest of the economy. It was highly destructive, maybe even more so because bona-fide, decent businesses couldn’t get capital. The capital allocation function was failing.”
Weild says he began collecting data to understand what had gone wrong, and he ended up tracing the problem to what he calls well-intentioned but misguided regulatory regulations.
The effect, he says, was to take away many of the economic incentives that support small-cap public companies. Weild says that he wants a new market for small-cap companies that would protect price spreads, so brokers would get higher commissions and commit to paying for research, trading and sales to support small-cap stocks. —Deborah Gage