The highly publicized equity offering by Facebook Inc. in early 2011 brought to light some of the tensions in markets for shares of companies that have not yet gone public. For more than a decade, capital has flowed to private companies through venture capital and private equity funds as well as individual investment. Investor interest in privately held companies has often surpassed interest in public markets, and investors have found ways to resell their shares through private markets, including electronic trading networks such as SecondMarket and Sharespost. Yet the level of available information about these companies and markets does not approximate that of public markets.

Some argue that potential IPO candidates are avoiding public markets because of the increased public company compliance costs resulting particularly from the Sarbanes-Oxley Act of 2002, as well as the Dodd-Frank Wall Street Reform Act of 2010. Behind this argument lies a concern that U.S. equity markets are becoming less competitive as compared to foreign stock markets where regulatory burdens are lower. This concern seems to have been a motivating force behind a letter, dated March 22, 2011, from Rep. Darrell E. Issa, Chairman of the Committee on Oversight and Government Reform of the U.S. House of Representatives, to Mary L. Schapiro, the Chairwoman of the Securities and Exchange Commission (SEC).

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