SEC spotlights IPO friction, KPMG sees implications for deal advisory

The SEC is pressing on a problem that reaches far beyond Wall Street headlines: smaller companies still struggle to make public offerings work as a capital-raising event, not just an exit for insiders. That debate surfaced again at the Small Business Capital Formation Advisory Committee meeting on April 28 at SEC Headquarters in Washington, D.C., after the agency announced on April 16 that the panel would meet to explore ways to encourage more companies to go public.

For KPMG’s deal advisory, audit and capital markets professionals, the message was less about policy theater than about workload. If the SEC actually reduces IPO friction, the pipeline changes before a single registration statement is filed. More private companies would need readiness assessments, SEC reporting support, controls testing, deal accounting advice, disclosure drafting and post-offering compliance help. That would also change the staffing mix, pulling more specialists into early-stage IPO preparation instead of leaving them to clean up issues after a company is already under pressure to price.

Paul S. Atkins framed the issue as access, saying the regulatory framework should give companies in all stages of growth the opportunity for an IPO, especially one that is a capital-raising mechanism rather than a liquidity event for insiders. He also said every IPO is an invitation for workers and savers to participate in the prosperity of the next generation of American enterprise. Hester M. Peirce, whose remarks were titled Getting All Your Ducks in a Row to IPO, stressed that the full ecosystem matters: analyst coverage, market-making, post-IPO liquidity and institutional interest all shape price discovery, and one-size-fits-all rulemaking can miss how small issuers actually reach the market.

Mark T. Uyeda made the numbers hard to ignore. He said the IPO ecosystem for small companies has quietly eroded over the years, pointing to the Office of the Advocate for Small Business Capital Formation’s 2024 annual report, which found that 44% of small- and mid-cap stocks had no analyst coverage at all. Uyeda also said small companies made up 44% of 2024 IPOs but raised only 3% of the capital. The office’s annual report, issued on Dec. 12, 2024, said IPO volume and proceeds remained well below the 2021 peak, even after a slight uptick in the first half of 2024.

The broader backdrop is blunt: an SEC background paper says the United States averaged 311 IPOs a year from 1980 to 2000, then only 102 a year since 2000, with the drop especially steep among small firms. For KPMG, that means the real test is not whether regulators sound friendlier. It is whether issuers can move through the public-offering process with less cost, less delay and fewer surprises, which is where advisory, audit and capital-markets teams will feel any change first.