The New York Stock Exchange’s plan to merge with Deutsche Borse, while promising more efficiency for investors in global stocks, may hurt small U.S. enterprises that are finding it increasingly difficult to tap into the stock market so they can grow and create jobs.
The move accelerates a trend of stock exchanges becoming more focused on the profitable trading in stocks of big global corporations at the expense of smaller companies trying to tap the market for the first time with initial public offerings (IPOs), stock analysts say.
The trend, which started in the mid-1990s, resulted from a multitude of well-intentioned regulations and technical changes in the trading of stocks, as well as the decisions by major stock exchanges to go public and, more recently, to join forces with other global exchanges.
Research shows that these developments have been bad for small corporations hoping to attract investors and are hurting U.S. workers and the larger economy because fast-growing small enterprises typically are important sources of dynamic growth and millions of good jobs in the U.S.
According to Grant Thornton LLC, a Wall Street accounting firm, the dramatic drop in stock offerings by small corporations in the past decade may have cost the economy as many as 22 million jobs — even before the Great Recession eliminated more than 8 million positions across the economy.
“The inability of emerging growth companies to access U.S. public equity capital by completing IPOs less than $50 million inhibits job creation and hurts American entrepreneurs more than any other group,” said Pascal Levensohn, founder of Levensohn Venture Partners.
The New York Stock Exchange, the Nasdaq Stock Market and other U.S. exchanges have essentially lost their status as public “utilities” that once served budding enterprises as well as small investors, said David Weild, Grant Thornton consultant and former vice chairman of Nasdaq.