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Study: IPOs Grow Under the JOBS Act

By Alicia Purdy, Managing Editor

A study from the State University of New York at Buffalo’s School of Management has found that the JOBS Act seems to be having its intended effect – creating jobs, by helping more startups go public.

Specifically, “the study found that the JOBS Act increased initial public offerings by 21 [percent] per year since it was passed in April 2012 — a 25 percent increase over 2001-2011 levels.”

Most of the new IPOs were related to biotechnology and pharmaceuticals.  In fact, says study co-author Michael Dambra, PhD, “businesses that are heavily invested in product research and development — like those in the biotechnology/pharmaceutical industry — have the most to gain from the JOBS Act.”

(Learn more about the JOBS Act here.)

Why is that?

One of the things the JOBS Act has accomplished is to clear the path for firms to reach out to prospective investors directly, rather than being required to share sensitive information with rivals and the public. This has created an easier path to IPOs as companies rack up investors behind the scenes before going public.

When companies go public, jobs are created as they continue to grow. However, the condition of the market (currently bull), may have affected the results and it’s possible that momentum from the JOBS Act wouldn’t be as strong in a bear market, according to researchers, who say further study would be needed to determine if the success would hold under adverse market conditions.

Read more about the study and its data here.