Submitted by Timothy J. Keating, Keating Investments, LLC
I submitted the following letter to the editor of The Wall Street Journal in response to an article published January 5, 2011, titled “Friending Private Capital.” Although the letter was not published in The Wall Street Journal, here is my response.
To the editor:
Your editorial “Friending Private Capital” raises a good question – why are so few companies going public today?
Up until the previous decade, low cost and efficient capital formation was a hallmark of the U.S financial markets. Individual investors at all income levels have been able to participate in exciting growth companies by buying shares of publicly traded stock.
Goldman’s creation of a special purpose vehicle to buy shares in Facebook speaks loudly to everything that is broken with capital formation in the U.S. today. Facebook is in no rush to go public because they likely perceive being public as burdensome in many ways. Shares of Facebook “trade” on private exchanges to which the general public has zero access. Goldman’s lawyers create a clever special purpose vehicle such that a group of investors (each with a purported minimum investment of $2 million) can be treated as one investor and thereby help Facebook avoid violating arcane securities laws. How did it all come to this?
Jobs are created by growing companies, which need efficient access to capital, which is most easily facilitated by selling shares of publicly traded common stock to institutional, high net worth and “mom-and-pop” investors, who in turn enjoy transparency and liquidity.
Going public and being public needn’t be complicated or burdensome. Goldman’s “Friending” of Facebook shares should be a clarion call to all involved in the equity capital market ecosystem that it’s time to do a root and branch review of everything that is inhibiting exciting private companies from going public in the U.S.