US Policymakers Propose Reforms to Revive IPO Market

The number of publicly traded companies in the United States has fallen from roughly 8,800 in 1997 to fewer than 4,000 in 2024 [1]. Meanwhile, nearly 1,600 privately held unicorns — startups valued at $1 billion or more — sit on a combined $6 trillion in unrealized value, with over 60% having not raised disclosed funding in more than three years [2]. Washington sees a problem. In late 2025 and early 2026, both Congress and the Securities and Exchange Commission launched the most ambitious effort to overhaul US capital formation rules since the JOBS Act of 2012.

Whether this amounts to a genuine fix for a broken pipeline or a risky rollback of investor protections depends on whom you ask — and how much weight you assign to the academic evidence from the last time Washington tried this.

The Collapse and Partial Recovery of US IPO Activity

The raw numbers tell a stark story. During the dot-com era, the US averaged more than 400 IPOs per year, with 406 companies going public in 2000 alone [3]. The 2008 financial crisis cratered issuance to just 21 IPOs. Recovery was slow: the 2010s averaged roughly 135 IPOs annually, about a third of the 1990s pace [4].

Then came the anomaly. In 2020 and 2021, a flood of special purpose acquisition companies (SPACs) and loose monetary policy produced 480 and 1,035 IPOs respectively — the latter an all-time record [3]. The hangover was severe. Rising interest rates, falling valuations, and recession fears pushed issuance to 181 IPOs in 2022 and 154 in 2023, the weakest stretch since the global financial crisis [5].

Source: Renaissance Capital / Stock Analysis

Data as of Mar 1, 2026CSV

The market has since partially recovered: 225 IPOs in 2024 and 347 in 2025 [3]. Q1 2025 was the strongest opening quarter since 2021, with 15 traditional IPOs raising over $7.9 billion [5]. But that momentum stalled mid-quarter amid a broad market selloff, and total activity remains well below the pre-2020 ten-year average of roughly $45 billion in annual capital raised [5].

The INVEST Act: Twenty Bills in One Package

On December 11, 2025, the House of Representatives passed the Incentivizing New Ventures and Economic Strength Through Capital Formation Act — the INVEST Act — by a bipartisan vote of 302 to 123 [6]. The bill bundles more than 20 separate capital formation measures into a single package. Its core provisions target the specific friction points that companies and their bankers cite when explaining why going public has become too expensive and slow.

Reduced disclosure for newly public companies. The INVEST Act cuts the audited financial statement requirement for emerging growth companies (EGCs) from three years to two, reducing the accounting and legal costs of preparing an IPO registration statement [6]. It also codifies existing SEC accommodations for confidential draft submissions and extends "testing-the-waters" communications — where companies gauge institutional investor interest before formally filing — to all issuers, not just EGCs [6].

Lower thresholds for seasoned issuers. The bill reduces the public-float requirement for Well-Known Seasoned Issuer (WKSI) status from $700 million to $400 million [6]. WKSI status lets companies file shelf registration statements that take effect immediately, making follow-on offerings faster and cheaper. The lower threshold would extend this privilege to hundreds of additional mid-cap companies.

Expanded private market access. Crowdfunding offering limits requiring only an accountant review rise from $100,000 to $250,000, with discretion to go to $400,000 [6]. Qualifying venture capital fund size increases from $10 million to $50 million, and the investor cap rises from 250 to 500 [6]. The accredited investor definition gets modernized with inflation-adjusted income thresholds and a new exam-based pathway [6].

Institutional infrastructure. The Act establishes an Office of Small Business within each of the SEC's major divisions — Corporation Finance, Investment Management, and Trading & Markets — to coordinate capital formation policy [6].

The SEC's Own Agenda: Atkins's "Make IPOs Great Again"

Running parallel to Congress, SEC Chairman Paul Atkins has launched his own initiative. In a December 2025 keynote titled "Revitalizing America's Markets at 250," Atkins proposed expanding the JOBS Act's IPO on-ramp, allowing newly public companies to remain on lighter-touch disclosure rules for several years rather than forcing full compliance quickly [7].

The most controversial element: eliminating mandatory quarterly (10-Q) reporting for most companies in favor of semi-annual filings [8]. Atkins argues the quarterly reporting cycle fuels short-termism and imposes compliance costs running into the millions without providing proportional value to long-term investors [8]. A second pillar targets what Atkins calls the "de-politicization" of shareholder meetings, refocusing annual meetings on core business matters like board elections rather than social or environmental proposals [8]. The third pillar addresses securities litigation reform aimed at reducing what the SEC characterizes as frivolous class-action lawsuits [8].

These SEC-level changes do not require congressional approval. The commission can advance them through notice-and-comment rulemaking, a process that typically takes 6 to 18 months from proposal to final rule.

The $6 Trillion Backlog

The scale of the companies waiting on the sidelines helps explain Washington's urgency. According to Crunchbase data, nearly 1,600 companies currently hold unicorn status globally, with a collective valuation approaching $6 trillion and total funding raised of approximately $1 trillion [2].

Source: Crunchbase

Data as of May 1, 2025CSV

The backlog is heavily concentrated among older vintage companies. Among unicorns that entered the list before 2021, roughly 470 remain private, collectively valued at over $3.2 trillion — more than half the total board value [2]. This cohort includes SpaceX, OpenAI, ByteDance, Shein, Stripe, and Databricks [2]. PitchBook data shows that 40% of US unicorns have been held in portfolios for at least nine years, representing over $1 trillion in locked-up value [9].

Sector concentration matters for understanding who benefits from reform. Excluding healthcare, 73.1% of 2025 IPOs occurred in AI, space technology, cryptocurrency, fintech, and defense sectors [10]. The pipeline for 2026 reflects similar concentration: Anthropic is reportedly preparing a mid-to-late 2026 IPO at an estimated $300–380 billion valuation, while companies like Dataiku, Circle, and others have hired banks for potential listings [9].

Is Regulation Really the Primary Barrier?

The reform push rests on a central premise: that regulatory burden is the main reason companies avoid public markets. The evidence for this claim is real but incomplete.

Compliance costs are substantial. One widely cited estimate puts the median US public company's annual compliance spending at 4.1% of market capitalization [11]. Sarbanes-Oxley, enacted after the Enron and WorldCom scandals in 2002, and the Dodd-Frank Act of 2010 added layers of internal controls, audit requirements, and executive certification obligations that disproportionately burden smaller issuers [11].

But multiple structural forces have simultaneously made staying private more attractive. Private equity funds managed $8.2 trillion in assets in 2023, more than double the $4 trillion managed in 2018 [11]. Total capital invested in private companies grew from $14.2 billion to $80 billion between 2002 and 2019 [11]. Secondary markets and continuation funds have created liquidity options that didn't exist a decade ago, letting founders and early employees cash out without an IPO [12].

The median age of a company at IPO rose from six years in 1980 to 11 years by 2021 [11] — a shift that tracks the growth of private capital at least as closely as it tracks regulatory changes. Companies that stay private longer avoid quarterly earnings pressure and can pursue long-term growth strategies without managing Wall Street's 90-day expectations [12].

A former SEC commissioner, Caroline Crenshaw, argued in 2021 that the trend toward private markets raises its own investor-protection concerns: as more value creation happens outside public markets, ordinary investors who lack accredited status are excluded from the highest-growth phase of companies' lives [13]. The INVEST Act's expansion of accredited investor definitions and crowdfunding thresholds attempts to address this, but critics argue it does so by exposing less sophisticated investors to higher-risk private placements rather than by making public markets work better.

What the JOBS Act Experience Tells Us

The most directly relevant precedent is the 2012 JOBS Act, which created the EGC category and allowed qualifying companies to provide reduced disclosures. A study by researchers Omri Even-Tov and Panos Patatoukas at UC Berkeley's Haas School of Business found that 66% of EGCs that chose reduced disclosures — providing only two years of audited financials instead of three — underperformed a broad market index within three years of their IPO [14]. Among EGCs that voluntarily disclosed three years of financials, the underperformance rate was 49% [14].

Adoption of reduced disclosure accelerated over time: by 2018, more than 80% of eligible EGCs chose the lighter option [14]. The Berkeley researchers found that companies electing reduced disclosures exhibited more speculative valuation profiles and lower institutional ownership [14].

The distributional impact is particularly relevant to the current debate. Institutional investors, the researchers found, "use publicly available information to avoid the worst-performing IPO stocks," while individual investors "tend to ignore fundamentals when investing in IPO stocks and are more exposed to the risks" [14]. Retail investors were disproportionately attracted to speculative, "lottery-type" companies — precisely the firms most likely to use reduced-disclosure provisions [14].

A separate study published in the International Review of Finance in 2025 offered a more nuanced picture, finding that EGCs outperformed comparable non-EGC firms by roughly 25 percentage points in the long run when institutional investors played an active role in post-IPO governance [15]. The implication: reduced disclosure may work when sophisticated investors provide a check on company quality, but harms outcomes when retail investors are left to fend for themselves.

The Steelman Case for a Thinner Pipeline

Not everyone views the decline in US listings as a crisis. Several arguments support the idea that fewer, larger, more mature IPOs serve investors better.

When companies stay private longer, more price discovery occurs before public listing. The 2021 IPO class — heavily driven by SPACs and companies that had been private for relatively short periods — produced notoriously poor aftermarket returns for retail investors who bought at inflated valuations [5]. By contrast, companies that list after years of private-market vetting tend to have more established revenue models, audited financials, and institutional investor bases.

The shrinking count of public companies also reflects massive consolidation through mergers and acquisitions, not just a failure of the IPO pipeline. McKinsey research has argued that while the number of listed firms has declined, the aggregate market capitalization and revenue of public companies have grown substantially, meaning public markets still capture enormous economic value even with fewer participants [4].

From a pension fund perspective, the growth of private equity and venture capital as asset classes has created alternative avenues for institutional exposure to high-growth companies. CalPERS, the largest US public pension fund, has increased its private equity allocation specifically because the returns available in private markets have outpaced public-market equivalents over the past decade.

International Competition: A Race to the Bottom or the Top?

The US is not alone in trying to reverse listing declines. The UK's Financial Conduct Authority implemented its most significant listing rule overhaul in over three decades on July 29, 2024, replacing the premium and standard listing categories with a single streamlined regime [16]. UK-listed company counts had fallen roughly 40% from their 2008 peak, and the UK accounted for only 5% of global IPOs between 2015 and 2020 [16].

Early results are mixed. In 2025, 23 companies raised £2.1 billion on the London Stock Exchange, a 170% year-over-year increase in proceeds — but from a very low base [16]. The reforms have not yet reversed the trend of UK-origin companies choosing to list on US exchanges instead.

Hong Kong introduced Chapter 18C of its listing rules, allowing pre-revenue specialist technology companies valued at HK$10 billion ($1.3 billion) or more to go public [17]. The regime targets AI, advanced hardware, new energy, and biotech firms — a direct play for companies that might otherwise list on Nasdaq or the Shanghai STAR Market [17]. However, Hong Kong's IPO process remains slower and more bureaucratic than its US competitors, limiting the practical impact so far [17].

The competitive dynamic cuts both ways. If US reforms succeed in making domestic listing cheaper and faster, other exchanges lose potential issuers. If they go too far in cutting disclosure, sophisticated issuers may still prefer the reputational premium of a full-disclosure US listing — or choose exchanges with stronger investor-protection regimes.

The Legal and Legislative Gauntlet Ahead

The INVEST Act's path to becoming law is far from clear. Having passed the House, it requires Senate passage and the president's signature. The Senate Banking Committee has not yet scheduled hearings on the bill, and several provisions — particularly the accredited investor expansion and crowdfunding threshold increases — face opposition from consumer-protection advocates who argue they expose unsophisticated investors to unregulated offerings [6].

The SEC's rulemaking agenda faces its own obstacles. Recent Administrative Procedure Act (APA) challenges have demonstrated that courts are increasingly willing to scrutinize and strike down SEC rules. The Fifth Circuit found that the SEC violated the APA by failing to justify the combined economic impact of two short-selling rules [18]. The Eighth Circuit ordered the SEC to either defend or rescind its climate risk disclosure rule [19]. In March 2026, advocacy groups sued in DC District Court over changes to shareholder proposal handling, alleging the SEC bypassed required notice-and-comment procedures [20].

These precedents matter for any new IPO-related rulemaking. If the SEC moves to eliminate quarterly reporting or substantially reduce disclosure requirements, challenges under the APA are virtually certain. Petitioners would likely argue that the SEC failed to adequately weigh investor-protection costs against capital-formation benefits — the same analytical framework that tripped up previous rules.

The realistic timeline: SEC rulemaking on disclosure simplification could produce proposed rules by late 2026, with final rules in 2027, assuming no litigation delays. Congressional action through the INVEST Act depends entirely on Senate appetite, which remains uncertain. Court challenges to any final SEC rules would add 12 to 24 months of uncertainty before the legal framework stabilizes.

What Happens Next

The fundamental tension at the center of this debate has not changed since the JOBS Act: every reduction in disclosure requirements that makes listing cheaper for companies also reduces the information available to investors evaluating those companies. The Berkeley Haas research suggests that institutional investors adapt to reduced disclosure far better than retail investors do [14].

The 2026 IPO pipeline — with potential mega-listings from AI firms, fintech companies, and long-held unicorns — will provide a practical test case. If the companies that go public this year deliver strong aftermarket performance, pressure for further deregulation will intensify. If retail investors suffer outsized losses on reduced-disclosure IPOs, the political calculus shifts.

The aftermarket performance of 2026's IPO class, as one legal analysis put it, will determine whether "the window widens or closes again" [10].

Source: FRED / S&P Dow Jones Indices

Data as of Mar 27, 2026CSV