Publications
SEC Commissioner Calls for Increased Disclosures by Privately Held Companies
Recent financial headlines have been inundated with stories of privately held companies, such as WeWork, Theranos and FTX, raising significant amounts of capital, only for investors to find out that the projections and promises they had received had no basis in fact. With the rise of โunicornsโ (companies valued at more than $1B) and โdecacornsโ (companies valued at more than $10B), private capital markets have outpaced the public markets over the past decade.[1] Moreover, with larger checks being written to privately held companies, many have delayed, or completely eschewed, going public, which would increase disclosure requirements.
In a recent keynote address at the Securities Regulation Institute, United States Securities and Exchange Commission (โSECโ) Commissioner Caroline Crenshaw highlighted this and the fact that current regulations regarding disclosure for privately held companies โ both when raising funds and generally โ are much less burdensome than for their publicly owned counterparts. This lack of oversight could be fostering an environment of deception for private companies, to the detriment of investors.
To read the full advisory, please click the PDF link below.
[1] See, e.g.,ย McKinsey & Co., Private Markets Come of Age: McKinsey Global Private Markets Reviewย 6 (2019).ย See generallyย McKinsey & Co, Private Markets Rally to New Heights: McKinsey Global Private Markets Reviewย (2022); Joan Farre-Mensa & Michael Ewens,ย The Evolution of the Private Equity Market and the Decline in IPOs, Harv. L. Sch. F. Corp. Governance (Sept. 28, 2017); Morgan Stanley,Public to Private Equity in the United States: A Long-Term Look(Aug. 4, 2020) (โ[C]ompanies have raised more money in private markets than in public markets in each year since 2009โ) (citingย Scott Bauguess, Rachita Gullapalli, and Vladimir Ivanov,ย Capital Raising in the U.S.: An Analysis of the Market for Unregistered Securities Offerings, 2009-2017, Division of Economic and Risk Analysis, U.S. Securities & Exchange Commission (August 1, 2018)).
