Arpit Gupta on the Virtues of Stock Markets

by Reihan Salam

My friend and colleague Arpit Gupta offers thoughts on the death of the stock market. He makes a number of important points, among them that:

(1) the regulatory environment has raised the cost of listing;

(2) financial institutions seem to have lost interest in dealing with illiquid new issues as they’ve found other profit-making opportunities;

(3) the tax code penalizes dividends and equity investments more than raising debt;

(4) early-stage investors need IPOs and a well-functioning public stock market to make their exits;

(5) exit by acquisition has downsides — e.g., big firms that swallow start-up minnows might manage them less than a small firm that grows organically;

(6) and there is a case for giving ordinary investors access to the high-growth sectors that are now shying away from the public markets.

Read the whole thing. Arpit is sympathetic to relationship finance, but he goes on to reference potential shortfalls of that approach.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.