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Paul Mampilly is an American investor and former hedge fund manager. Paul has been featured on CNBC, Fox Business News and Bloomberg TV. He is the founder of the popular investment newsletter Profits Unlimited, where he uses his skills, experience and knowledge as a former Wall ... more

Wall Street’s Glory Days Are Numbered

Date: Thursday, October 26, 2017 12:10 PM EDT

However, that’s just the beginning…

Exorbitant Fees Cannibalize IPOs

According to a survey of registrations filed by the Securities and Exchange Commission — an arm of the government that regulates stocks — the average cost of these middlemen’s fees amounts to $3.7 million.

While that may sound like a lot of money to you, I actually believe that this average is way too low.

Bottom line: It costs way too much to become a publicly traded company today.

The best evidence of this is the lack of IPOs. After peaking in 1999 with 486 companies going public, IPOs have since crashed.

In 2008, just 31 companies became publicly traded.

And 2016 marked the lowest number of companies going public in nearly a decade, with only 105 IPOs.

A Better Way to Go Public

It’s clear that more companies are choosing to stay private longer.

But now, these companies will have a new way to get their shares and stock to people wanting a slice of the pie.

This new process is called an ICO/ITO, or initial coin/token offering, which is being popularized by cryptocurrencies.

Basically, this is the process of digitizing an asset to make it publically traded via the internet. And if used to sell stocks, this process has been shown to dramatically reduce costs.

According to one Quora user, an ICO can be done for as little as $100. On the high end of the spectrum, an expensive ICO might cost $300,000, said a lawyer on the same site.

That’s still peanuts compared to the $70 million an investment bank will charge your $1 billion company. Or the lowball $3.7 million estimated fees you’d pay an army of middlemen to do an IPO.

Now, to my knowledge, no one has gone this route yet. But the dramatic cost reduction in doing an ICO/ITO offering vs. an IPO means it’s only a matter of time before someone tries this method out.

And once a successful model has been built, it’ll be curtains for Wall Street’s current IPO business.

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