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18 Va. L. & Bus. Rev. 1 (2023-2024)

handle is hein.journals/valbr18 and id is 1 raw text is: VIRGINIA LAW & BUSINESS REVIEW VOLUME 18 FALL 2023 NUMBER 1 ALL STICK AND NO CARROT? REFORMING PUBLIC OFFERINGS Stephen J. Choi A.C. Pritchardt ABSTRACT The SEC heavily regulates the traditional initialpublic offering (IPO). Those regulatoy burdens fuel interest in alternative paths for private companies to go public, regulatoy arbitrage. The SEC's response to the emergence of alternatives, most recenty SPACs and direct istings, has been to re-assert the regulatory protections in a traditional IPO, including heightened iabiity under Section 11 of the Securities Act. The SEC's treatment of the traditional IPO regulatory process as a one-side- fits-all regime ignores the weaknesses of this process, in particular the informational inefficiency of the book-building process. In this essay xe argue that the agency's focus in regulating issuers going public should be on promoting market prcing driven by sophisticated investors with access to credible disclosure. We propose an alternative approach that provides issuers with a clear choice in going public: (1) provide disclosures for a seasoning period prior to listing their securities for publkc trading, with corresponding reductions in regulatory requirements for going publkc (the carrot'); or (2) impose heightened Liability on company's going public without a seasoning period, not ony for registration statements, but also for the company's periodic disclosures released duing a post-ofemng Bernard Petrie Professor of Law and Business, NYU Law School; Frances and George Skestos Professor of Law, University of Michigan. The authors are grateful for helpful comments on earlier versions of this article from Harald Halbhuber, Yian Huang, Un Kyung Park, Rezwan Pavri, Greg Rodgers, Andrew Tuch, and participants at the Going Public in the 202s Conference sponsored by the Columbia Law School/Business School Program in the Law and Economics of Capital Markets, the National Business Law Scholars Conference, the Trans-Pacific Business Law Academic Webinar, as well as workshops at the University of Florida and Florida State University. Pritchard acknowledges the generous support of the William Cook Endowment of the University of Michigan. Copyright © 2023 Virginia Law & Business Review Association 1

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