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International Financial Law Review (IFLR) interviewed partner Ilir Mujalovic (New York-Capital Markets) about the evolution of the Jumpstart Our Business Startups (JOBS) Act, enacted into law by President Obama in 2012.
The Act’s objective was to simplify the process through which companies go public and reduced the number or disclosures and requirements needed to pursue an initial public offering.
"The overall goal of the JOBS Act is to pursue capital formation and in particular help with initial public offerings (IPOs)," Ilir said. "Historically, when compared to today and even subsequent to the passage of the JOBS Act, IPO levels was at a much higher level, especially in the 1990s."
Companies can simply decide, given the recent strength of private capital markets, to stay private longer. This may allow them to continue to focus on their core business without the significant time and financial effort involved with the going public process, he said. "If you can get access to capital in the private markets, you can decide to delay the IPO process as much as you can and pick the opportune time to launch the offering."
However, many companies do not have this flexibility or prefer to have a broad investor base as well as research coverage from investment banks and therefore pursue an IPO even if they have access to private capital.