Courtesy of Pam Martens.
New York Stock Exhange
America doesn’t have a jobs problem; it has an IPO problem. The lack of jobs can be directly correlated to the misallocation of capital by Wall Street to financial wagers instead of directing the flow of capital into job producing growth industries.
A review of the 201 initial public offerings (IPOs) at the New York Stock Exchange so far this year, shows that 99 were financial wagers on old debt and/or equity instead of new listings of real companies making real products to create real jobs. The 99 IPOs were closed end mutual funds or ETFs (Exchange Traded Funds). Another 11 listings were banks or financial firms.
One of the financial firms is KKR Financial Holdings LLC. This is how it describes itself on its web site: “KFN, is a New York Stock Exchange-listed specialty finance company with expertise in a range of asset classes. KFN’s core business strategy is to leverage the proprietary resources of its manager with the objective of generating both current income and capital appreciation. KFN is externally managed by KKR Financial Advisors LLC, a wholly-owned subsidiary of KKR Asset Management LLC, which is a wholly owned subsidiary of Kohlberg Kravis Roberts & Co. L.P.” Does that sound like a growth industry with a breakthrough innovation that will jumpstart jobs in America?
Of the remaining listings, I randomly selected a company I’d never heard of to see if there might be any prospect for new jobs with good wages. The company is called Rexnord Corporation and went public on March 29 of this year. At first, I was hopeful – the company makes real things – gears, couplings, industrial bearings, flush valves and faucet products. But as it turns out, the bulk of the money from the IPO was not going into expansion where there might be some hope for job creation, it was going to be used to pay off debt the company owed to Wall Street firms.
On December 14 of last year, Kate Mitchell testified before the Senate Banking Committee’s Subcommittee on Securities, Insurance and Investment. Mitchell is a Managing Director at Scale Venture Partners, a venture capital firm based in Silicon Valley and a former Chairman of the National Venture Capital Association. Mitchell testified that “Companies that were founded with venture capital accounted for 12 million private sector jobs and $3.1 trillion in revenue in the U.S. in 2010, according to a 2011 study by IHS Global Insight. That equals approximately 22 percent of the nation’s GDP. Almost all of these companies, which include Apple, Cisco, Genentech and Starbucks, began small but remained on a disciplined growth trajectory and ultimately went public on a U.S. stock exchange.”
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