The Securities and Exchanges Commission (SEC) has strangled the American economy over the past four decades when our data begins.
The number of Initial Public Offerings (IPOs) have plunged. Costs have ballooned. The restrictions on who gets a first bite of the cherry are now almost total.
Data shows SEC has and is destroying America’s economy. Unsatisfied, it is now moving to destroy the world economy by claiming jurisdiction over every land on earth as long as one American or an American service has something to do with the relevant activity.
This institution, even more than the Fed, is the root cause of most of the dissatisfactions of American citizens over how they are being ruled.
That is because this institution is taking our bread, strangling public offerings and through that, the economy itself.
There are many things revealed by this data compiled by Jay Ritter, an Eminent Scholar Chair at the University of Florida.
First, there is a general increase in IPO numbers as the economy was growing and the population was increasing, with it reaching a peak of nearly 700 IPOs in 1996.
That shows millennials don’t call the 90s a great time for no reason, and more strikingly the data above shows why there was a general decline to the point IPOs have fallen 7x from the peak.
The last two columns show the number of managing underwriters. One was enough in the 80s. Maybe 2 in the 90s. Now you need seven.
An underwriter is the big banks. They buy or agree to market all the stocks that are to be issued, and then the bank sells them to the public in the Initial Public Offering.
They file the prospectus with SEC and they get 7% of the offering. Making this a very lucrative business for banks that are protected from competition in this area by the force of the law as interpreted by SEC.
And SEC, not the judiciary, as there has been no Supreme Court interpretation of the Securities Act 1933 where it concerns digital offerings within at least our working lifetime.
Another point to notice in the above data is the percentage with multiple bookrunners. They being the assessors of a company’s financials and current market conditions to arrive at the initial value and quantity of shares to be sold to private parties.
In the 80s and even in the 90s, it was close to zero percent. Nowadays, almost 100% of IPOs need multiple bookrunners.
Absolute Restriction on Capital Formation
The destruction of America’s economy has been gradual, but total, with this shown most clearly by a table from the eminent scholar.
In the 80s, about 20% to 30% of companies had given equity, as in stocks and ownership, to Venture Capitalists (VCs) who generally are billionaires most often, or thereabouts.
This increases a bit in the 90s, but still it’s at about 40%. Now, 70% of the companies that go public have given usually about half or more of their company ownership to billionaires.
This isn’t all. Buyouts are when an already formed company buys a smaller one. Like Facebook buying Instagram back when.
If we add both, in the 80s generally about 70% of the companies had given no equity to either VCs or corporations prior to going public.
Now, in 2017 for example only 5% of tech companies did not first give their ownership to VCs or corporations, but to the public.
The effects of this are the headlines we hear everyday. Inequality reaching gilded age levels. Monopolies everywhere. Almost no new products ever make their way to our shops anymore. The same copy clone high street everywhere. Mortgage level prices for life saving medicine.
Opening the Gates
Smart, ambitious, innovative young men, born not to billionaires but in the middle or upper middle class or more rarely even in lower circumstances, have been fighting this injustice through the only field where meritocracy still rules supreme: code.
“The Securities and Exchange Commission announced today that it obtained court approval of settlements with Telegram Group Inc. and its wholly owned subsidiary TON Issuer Inc. to resolve charges that Telegram’s unregistered offering of digital tokens called “Grams” violated the federal securities laws. The defendants agreed to return more than $1.2 billion to investors and to pay an $18.5 million civil penalty.”
That’s the result. Telegram was founded by a Russian, Pavel Durov and his genius brother. Both are perpetual travellers, going from country to country with no fixed abode. Telegram Messenger is incorporated in Berlin. And yet it is the bankers’ lawyer, Jay Clayton who Chairs the SEC, that tells them what to do.
How then do Europeans get to vote in these American elections that are coming up if America is to exercise jurisdiction over Europe?
Notice they make no charge of undue behavior, except according to their interpretation this was an “unregistered offering of digital tokens.”
There is no American law that mentions digital tokens and there is no high court in any jurisdiction that has ruled on whether digital tokens are “unregistered offerings.”
The unelected and unaccountable and in this case very biased Securities and Exchanges Commission is instead making law and not just for America, but the entire world.
Telegram can’t be blamed for kneeling in the end. It would take years and much money to take this to the Supreme Court.
The American people can be blamed however for their complete and utter failure to do anything about the destruction of their economy.
Although plenty of Americans have tried, with a slow opening of the gates continuing in some tech corners, but SEC is doing its best to tyrannically try and stop any attempt to get back to the inventors and the people in general owning our inventions or businesses, instead of being forced to sell them off first to Clayton’s friends.
And more outrageously, they are doing so not just in their own jurisdiction in America, but even in Berlin.
That means Europe has much blame too for failing to stand up for their sovereignty as this $20 million fine Telegram has to pay indirectly comes out of the pockets of many European users of this messanger.
Moreover, Telegram made the offer to accredited investors. The general public could not give them any of the $1.2 billion they raised, however much they may have wanted to.
This massive fine therefore, perhaps the biggest for a tech company, is solely due to the fact Telegram did not choose the American jurisdiction or any jurisdiction, but the code jurisdiction.
Telegram tried to fight them in the lower courts, but those judges are still at the lower court because they’re not very good at their job as otherwise they’d quickly move up to higher courts.
Taking it further is a huger burden. So they’ve chained them, and with them, our ownership over our own companies.