I am dismayed by the number of pundits, legislators and organizations, claiming to be “small investor advocates”, who misrepresent the JOBS Act as another piece of legislation favoring the Wall Street establishment.
The truth is the JOBS Act invites competition from both smaller financial service firms and investors which will in turn de-monopolize our capital markets and take control away from the self-serving supersized financial conglomerates.
I feel compelled to set the record straight, for the people of this nation deserve to know who really has their best interests at heart.
First of all, the JOBS Act is not a bill to appease Goldman Sachs or to help the rich get richer. It is a bill that serves regular hardworking Americans who, for nearly 80 years, have not had the same investing liberties as wealthy Americans. Deemed by the Government as not sophisticated enough to understand private company investing, small retail investors have been legally prohibited from putting their money into some of today’s hottest growth companies.
Instead, they are forced to sit on the sidelines and wait until these companies complete their IPO. Unfortunately, because companies are no longer going public in the earlier stages of their growth cycle, smaller investors can do nothing but watch these companies increase in value from afar. All the while angels, VCs and accredited (aka rich) investors reap all of the appreciation during a company’s climb to the public markets. Maybe someone can explain to me the logic behind laws that permit average citizens to purchase stocks only when “sophisticated” investors are ready to dump them.
Personally, I think it is an abuse of power for Government to dictate how we deploy the money that we earned through our own labors. Unless Government gave us that money, it should not have any discretion over how we spend it. We should have the freedom to invest our money in a risky start-up or use it to buy 64 ounces of a diabetes-inducing soft drink. Hell, we should be able to burn it if we so desire. Why is it only acceptable for the Government to squander our money?
Fortunately the JOBS Act has been signed into law and will soon democratize the investing process. But for some inexplicable reason, big government enthusiasts are pointing to Facebook’s unsuccessful IPO as an excuse to disparage this legislation. This is not only dangerously irresponsible, but appallingly disingenuous. The hypocrisy is simply shameless. Case in point, I recently learned that the same organization insisting it fights for fairness in the financial system is actually campaigning to have the net worth and income minimums for accredited investors increased. This will do nothing but widen the level of inequality.
I agree that Facebook’s IPO epitomizes the great injustice in our capital markets, but more importantly, it demonstrates just how disgusted smaller investors have become with it. Facebook (NASDAQ: FB) is down nearly 30% off its IPO price of $38 mainly because smaller investors have refused to support it. The crowd is telling us loud and clear that they are no longer willing to be the “exit strategy” for the privileged. Until smaller investors are afforded equal growth opportunities, our capital markets will continue to deteriorate.
The chart below should serve as the “poster child” for investor discrimination. Investor Independence Day cannot come soon enough.