| Please join The Information at the New York Stock Exchange on Monday, April 27, to hear from top executives and investors on how the rapid buildout of AI is reshaping tech, finance, and capital markets. Learn more here. Welcome back! Quarterly earnings could be going away. Will this result in more IPOs? One of the hallmarks of investing in public stocks is receiving quarterly updates from the companies. Those financial results and, even more so, forecasts can sink or lift stocks. Preparing them is such a time-suck for company executives that some startup founders have pointed to these reports as a reason to stay private. The Securities and Exchange Commission is considering removing that barrier somewhat, lowering the requirements for public companies to make updates to twice per year. Advocates of these updates note they're designed to protect investors from being saddled with stocks well after a company's business starts to slow—or worse. But the requirement may be preventing investors from backing great companies, as well. That's particularly true for individual investors, who are still largely shut out from investing in private startups—despite efforts from companies such as Robinhood. There are 1,700 unicorns that have yet to IPO, which can be bad news for both the private investors who aren't seeing liquidity for their shares and public investors who miss out on the opportunity to invest in fast-growing businesses. To be sure, many of these companies have no business going public. Some of them have seen growth stagnate and fumbled expectations. Many of the companies that went public in 2021 were woefully underprepared and burned investors. But there are many others that are fast growing and see the need to report quarterly earnings as a serious burden. They believe that putting out earnings reports twice a year rather than four times will give them enough breathing room to focus on the longer term good of their businesses, some founders of startups worth over $1 billion tell me. Highly valued companies like Stripe and Databricks have spent years punting on IPOs because the risk of going public seemed to outweigh the potential reward. It's the public investors who missed out on that growth. Imagine if these companies went public at $10 billion valuations and individual investors could have reaped 10x gains. Sometimes more regulation harms the very people it is trying to protect. It remains to be seen whether the SEC makes this change. The agency is preparing the proposal, according to The Wall Street Journal. The agency's commissioners still need to vote on it. But the timing may be right: President Trump says he backs the idea. If it happens, we could start to finally see a greater number of unicorns make the leap to going public. That may not be enough to shake the IPO market out of its doldrums. But it won't hurt.
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