Today's rapid-fire, anyone-can-play market makes it tougher for small companies to raise money to grow and hire. Do we need a new market to save the economy?
While economists debate whether we're headed for another Great Depression, we're already in one of another sort: a great depression in the number of stocks available on U.S. stock exchanges.
In fact, this may be one reason for the economic woes that swamp us now.
Do small caps outperform large caps?
Experts blame the revolution in the U.S. stock market since the mid-1990s. That has changed the game for the pros and brought in throngs of small investors. But it's also made the U.S. market a tougher place for young, creative companies that need capital to grow.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 300, 213, {"configCsid": "MSNmoney", "configName": "player-money-articles-16x9", "player.vcq": "videoByUuids.aspx?uuids=e617f244-adaf-441a-b250-584729384d1c,cc99332b-c6c8-45df-8bc1-3e8f584ba607,f9ff0ca1-3dac-411b-abe3-854427634dba,1f52567c-c91d-4823-aaff-2f290f5f559b,83e10f71-7f6e-49dd-9e85-de6c61f3b66a,875de225-cb9c-4a07-9966-b98ec2d57632,c25753a7-6471-4ae2-a678-20bfa444708c,15fd2cba-79e0-decd-edda-45e17ee679ac,b6dc2505-9b8c-4e1f-9ca7-cec2ea02c2cb,752f725e-0a17-4bce-9b62-3c8fbf699e30", "player.fr": "iv2_en-us_money_article_16x9-Investing-CompanyFocus"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=e617f244-adaf-441a-b250-584729384d1c,cc99332b-c6c8-45df-8bc1-3e8f584ba607,f9ff0ca1-3dac-411b-abe3-854427634dba,1f52567c-c91d-4823-aaff-2f290f5f559b,83e10f71-7f6e-49dd-9e85-de6c61f3b66a,875de225-cb9c-4a07-9966-b98ec2d57632,c25753a7-6471-4ae2-a678-20bfa444708c,15fd2cba-79e0-decd-edda-45e17ee679ac,b6dc2505-9b8c-4e1f-9ca7-cec2ea02c2cb,752f725e-0a17-4bce-9b62-3c8fbf699e30;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');What we need is a brand-new stock market.
Find an online broker and start tradingThe moribund marketplace This market revolution brought a host of transformational changes: online brokerage accounts, cheap trades, fast trades and a proliferation of electronic exchanges. This allowed many more everyday investors to dive into stocks.
It also opened the way for computerized high-frequency trading of millions of shares for tiny gains on each one, because trading costs are now so low. Much of the action has shifted to trading indexes instead of stocks. (Read "Is investing (in companies) dead?")
All this made the stock market a far more hostile place for small companies, because the changes steamrolled an old Wall Street regime that once nurtured and supported newbies. Instead, the vast scale of rapid-fire, index-based trading favors big companies.
The result is that decidedly fewer small companies are joining the market each year through initial public offerings, or IPOs. Though the numbers are up over last year -- read "3-D IPO and other hot new stocks" -- they're not close to what we saw in the booming 1990s.
This means fewer companies can raise capital to invest and grow, and we're losing the jobs and growth they might have created. The new market There may be a fix: a new stock market that would cater to small companies and bring back the old ecosystem that used to support them.
This is the master plan of David Weild and Edward Kim, two small-capitalization-stock experts who work for auditing firm Grant Thornton. Weild and Kim advise small companies on how to go public. A cynic might argue they're just trying to drum up business and, to some extent, they are.
But they're also both career experts in the small-cap market. So their idea for a new but old-school stock exchange for small-cap companies may not be as wacky as it sounds. (Read their plan here; it's a .pdf file.)
As an investment banker, Weild helped bring more than 500 companies public earlier in his career at Prudential Securities. Kim once actively supported the market in small-cap stocks as a research analyst at Robertson Stephens, one of the small-cap specialist brokerage shops put out of business by the stock market revolution, and as a trader at Lehman Brothers.
Continued: The damage done More from MSN Money
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Rate this Article Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowThank you for rating.UGR('ratCntrl')High var avgRating=0;avgRating=6.028986; if(avgRating!=0){avgRating=avgRating/2;avgRating=Math.round(avgRating*100)/100;var sDisplayText="Average rating: " + avgRating + " from ";var usersCount=69;sDisplayText = sDisplayText + usersCount;if (usersCount==1)sDisplayText=sDisplayText + " user";else sDisplayText=sDisplayText + " users";avgRatingElem=document.getElementById("averageRating");avgRatingElem.innerText=sDisplayText;} View all top-rated articlesE-mail us your comments on this article Discuss in a message board MSN Money InsightNew Investor CenterMarket DispatchesJubak's JournalTop Stocks blogCompany FocusContrarian ChroniclesSmart Spending blogFast AnswersDecision CentersStart InvestingMutual FundsFind Hot StocksSimple StrategiesPower ToolsInvesting for IncomeReal Estate InvestingRecent Articles by Michael Brush8 bargain buys for the rebound 08/24/20108 CEOs' total windfall: $250 million 08/10/20103-D IPO and other hot new stocks 08/03/2010More . . .Stocks To WatchBoeingLions GateBarrick GoldU.S. SteelMcDonald'sMasterCardSaksMonsantoFund data provided by Morningstar, Inc. © 2009. All rights reserved.StockScouter data provided by Gradient Analytics, Inc.Quotes supplied by Interactive Data.MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.Msn.Video.createWidget('Gallery8Container', 'Gallery', 500, 230, {"configCsid": "MSNmoney", "configName": "gallery-money-article-site-wide"}, 'Gallery8');msft.msn._ic.cid='52mj3uxfq3rwt35vy865rhesmsdcypk8';msft.msn._ic.pst=false;msft.msn._ic.pgn=1; Be the first to commentAdd a commentShow commentsSort by:Newest firstOldest first_uc2f12('iucGo');1 - 10 of 11PreviousNextOtis Campbell #18/31/2010 7:32 PMI usually find Mr. Brush to be very objective, but this article smells a bit like a sales pitch. Look, isn't it just possible that in addition to the negative public sentiment toward the corruption of Wall Street, that companies are choosing to stay private because of other advantages? Maybe they just don't want to play the games that come with being public, a board of directors that tosses a few crumbs to stockholders, and pressure to screw employees and send their jobs overseas are things smart entrepreneurs may prefer to avoid.ReplyReport Abusetnjr #28/31/2010 8:28 PMOne major point left out, Sarbine-Oaxley. The regulations and costs for a small company to go public at huge. Many small companies prefer to stay private to save this administrative headache. Also look at the number of foreign companies that delisted so they would not be subject to this rules.ReplyReport Abusecfzylai #38/31/2010 8:29 PMLife is great in The Great America now and in the future no matter how bad the economy is . Let's compare to the other many countries in the world , we consider ours a lucky one right ? Enjoy while you can . I will never complaint about living in America .ReplyReport Abusesanxey #48/31/2010 8:33 PMThat has changed the game for the pros and brought in throngs of small investors. But it's also made the U.S. market a tougher place for young, creative companies that need capital to grow.ReplyReport Abusecitywaha #58/31/2010 8:35 PMMaybe they just don't want to play the games that come with being public, a board of directors that tosses a few crumbs to stockholders, and pressure to screw employees and send their jobs overseas are things smart entrepreneurs may prefer to avoid.ReplyReport AbuseCantiq #68/31/2010 8:41 PMHear ! Hear !
We don't need another market. Small companies cant play in the market. If a company wont do an IPO because they wont do a deal because it under $50million then too bad. A small company will do what it can some other way.
As for jobs, American jobs got sent overseas because of labor costs in America. Everybody wants to make $50/hour, drive a caddy, live in a $200k house and shop at Walmart. Well where do you think the money is going to come from to pay for the caddy and house when you don't have a $50/hour job? No company suppying products to Walmart can afford to pay you $50/hour.
We want our products cheap but want to work for the highest wages.
ReplyReport Abusedam tired of this #78/31/2010 8:42 PMImagine that, a bunch of traders who lost their jobs after ripping off millions of Americans for years want to start their own stock market!
No thanks............I'd rather invest into a private company through a private partnership than let these crooks open another small cap market.
ReplyReport AbuseRhettButler #88/31/2010 11:14 PMSarbine-Oaxley is a prime suspect behind the drop in IPO's. Another unexamined culprit would be our denial of visas and citizenship for talented immigrants, many of who are educated right here. Think Google, a very large number of our best and brightest companies are founded by immigrants. Jobs and companies that might have been US based are now finding homes abroad as we are making it clear we don't want these people.ReplyReport AbuseKimmyP1718 #98/31/2010 11:28 PMSame here.ReplyReport Abusevarod #108/31/2010 11:33 PMthat is the usual republican reply to selling u.s. workers out to 20 cents an hour slave labor. if you go back to the 90's the con job ross perot accused george bush of perpetrating has come to pass.ReplyReport Abuse1 - 10 of 11PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/CompanyFocus/how-the-stock-market-is-killing-jobs.aspx?page=2&','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of ConductPlease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign-in/*MSN PrivacyLegalAdvertiseRSSHelpFeedbackSite mapAbout our ads© 2010 Microsoft/*The moribund marketplace This market revolution brought a host of transformational changes: online brokerage accounts, cheap trades, fast trades and a proliferation of electronic exchanges. This allowed many more everyday investors to dive into stocks.
It also opened the way for computerized high-frequency trading of millions of shares for tiny gains on each one, because trading costs are now so low. Much of the action has shifted to trading indexes instead of stocks. (Read "Is investing (in companies) dead?")
All this made the stock market a far more hostile place for small companies, because the changes steamrolled an old Wall Street regime that once nurtured and supported newbies. Instead, the vast scale of rapid-fire, index-based trading favors big companies.
The result is that decidedly fewer small companies are joining the market each year through initial public offerings, or IPOs. Though the numbers are up over last year -- read "3-D IPO and other hot new stocks" -- they're not close to what we saw in the booming 1990s.
This means fewer companies can raise capital to invest and grow, and we're losing the jobs and growth they might have created. The new market There may be a fix: a new stock market that would cater to small companies and bring back the old ecosystem that used to support them.
This is the master plan of David Weild and Edward Kim, two small-capitalization-stock experts who work for auditing firm Grant Thornton. Weild and Kim advise small companies on how to go public. A cynic might argue they're just trying to drum up business and, to some extent, they are.
But they're also both career experts in the small-cap market. So their idea for a new but old-school stock exchange for small-cap companies may not be as wacky as it sounds. (Read their plan here; it's a .pdf file.)
As an investment banker, Weild helped bring more than 500 companies public earlier in his career at Prudential Securities. Kim once actively supported the market in small-cap stocks as a research analyst at Robertson Stephens, one of the small-cap specialist brokerage shops put out of business by the stock market revolution, and as a trader at Lehman Brothers.
Continued: The damage done More from MSN Money
1 | 2 | 3 | next >
Hear ! Hear !
We don't need another market. Small companies cant play in the market. If a company wont do an IPO because they wont do a deal because it under $50million then too bad. A small company will do what it can some other way.
As for jobs, American jobs got sent overseas because of labor costs in America. Everybody wants to make $50/hour, drive a caddy, live in a $200k house and shop at Walmart. Well where do you think the money is going to come from to pay for the caddy and house when you don't have a $50/hour job? No company suppying products to Walmart can afford to pay you $50/hour.
We want our products cheap but want to work for the highest wages.
Imagine that, a bunch of traders who lost their jobs after ripping off millions of Americans for years want to start their own stock market!
No thanks............I'd rather invest into a private company through a private partnership than let these crooks open another small cap market.
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