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Small Cap Exchanges Would Be A Boon For Small Businesses, Main Street Workers And Investors

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Small businesses today face a problem almost as unknown as some businesses themselves: Stock exchanges designed to make them public often keep them in the background. Currently, these smaller companies, known as small caps, are required to be listed on the same exchanges as the Fortune 500 when listed, so the bigger competitors often overshadow them when competing for the attention of the public. investors.

The Main Street Growth Act would allow exchanges to do what they do best by creating venture capital exchanges specifically for small businesses and people looking to invest in them. The option to host small businesses on their own exchanges would not only help small businesses succeed alongside their giant counterparts, it would also be a boon to Main Street investors, the US economy, and working people.

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So what’s the deal with a status quo that channels small businesses to places like the New York Stock Exchange or the Nasdaq? This can leave a diversity of talents and opportunities untapped. Even newbies to the WNBA aren’t taking the field alongside their NBA counterparts. If coaches were to choose between Breanna Stewart and Kevin Durant, they would have to relegate a huge amount of talent to the sidelines, despite the WNBA and NBA being packed with some of the best players in the world.

FILE Kevin Durant # 35 of the Golden State Warriors on May 08, 2019 in Oakland, California. (Photo by Ezra Shaw / Getty Images)

A single frame isn’t just bad for basketball. It’s bad for business and bad for anyone whose salary or retirement savings depend on a healthy American business landscape.

Small-cap stocks on the NYSE just aren’t as exposed to investors in existing exchanges, as companies with the highest market capitalization (the total value of all stocks in a company) have a bigger name. A startup like the Allbirds shoe and clothing company isn’t a household name like Disney, Netflix, or Nike. Investors are not only less likely to buy and sell small cap stocks, they are even less likely to know about the smallest people and the great growth opportunities that they could offer exist.

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Since the current arrangement makes the IPO unattractive for many small caps, these companies either wait longer to offer their shares or never open to public investment at all. Too often, companies forgo the significant growth opportunities that come with raising capital on the stock market. It wasn’t that long ago that Blockbuster was still the king of video rental. In 2002, Netflix’s initial public offering on the Nasdaq raised $ 82.5 million. Now, no one starts their weekend off with a DVD rental from their local Blockbuster, but people around the world are more likely to watch Netflix than to take a daily vitamin.

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But how many opportunities like Netflix never appear on investor radar? Venture capital exchanges offer greater visibility which would encourage more budding companies to sell their shares to the public and thereby raise more capital. This capital enables at least two things that drive the US economy: It fuels innovation and allows companies to expand their operations. Larger operations create more jobs.

Stepping into the ground floor of promising business models can be as good for investors as it is for workers in small businesses. Many Standard and Poor’s companies have already seen their strongest growth seasons, but small-cap investors could benefit from a higher rate of return from companies that still have significant growth potential, like Netflix’s did when she was still in the shadow of Blockbuster. A single Netflix share was worth only $ 15 in 2002. An investor who then owned 1,000 Netflix shares could now withdraw more than half a million dollars.

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From the investor’s perch, the benefits of small caps are evident across the board. In 2021, the S&P Small Cap 600 Index, which tracks small businesses, constantly showed higher total returns for small cap investments compared to the S&P 500.

While the Main Street Growth Act provides flexibility for small businesses, it does not impose it. The choice between listing on a venture capital stock exchange or one of the existing stock exchanges would be entirely up to individual companies.

As a result, allowing small caps to woo investors looking for exactly what they have to offer would be a win-win situation for the US economy, for small businesses, for investors, and for workers.

Republican John Kennedy represents Louisiana in the United States Senate.

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