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Going Public Privately

2014 will be the year of the secret IPO

This article has been corrected.

The misleadingly named JOBS Act has been widely and justifiably criticized for not doing anything to create jobs. But the legislation is is proving very popular for emerging companies that want to keep their exploratory IPO filings secret—a rule most famously exploited by Twitter.

At least that’s the impression you get from David Ethridge, the head of the NYSE’s capital markets group.  “It’s a beautiful thing to allow them to file confidentially, and they’re all doing that,” Ethridge told Quartz. “They’re testing the waters,  and you’re going to see that continue to grow. You won’t ever see it [the confidential filings] but it’s happening.”

There is of course no way of verifying these claims—the filings are confidential, after all. But it raises some very interesting questions for IPO markets next year.

The IPO spigots burst open in the fourth quarter of 2013, with a string of big, successful, brand-name debuts including Twitter, Hilton Worldwide and, rounding out the year this week, AMC Entertainment.  The 2014 pipeline also looks promising—cloud storage firms Box and Dropbox and Chinese e-commerce giant Alibaba are among the likely candidates—but whether momentum from the best year in over a decade for new listings can be sustained remains to be seen.

“There’s two big ones out there in the tech world in the Valley that are going to come in the coming 12 months,” Ethridge said carefully, without naming names.  “Cloud stuff that I think is going to be of interest. There’s another cool company out of China that will hit the radar screen.  There’s some cool stuff. These are billion-dollar IPOs, not [just] billion dollar companies. “

The ability to file confidentially was designed to benefit American startups (and thus encourage them to create more jobs). Before the JOBS Act, offshore companies seeking to list in the United States were already able to file confidentially. “We have filings right now with us from roughly 15  to 20 countries,” Ethridge said, mentioning China, the UK and Luxembourg as some of the best represented countries.

What makes the US an attractive destination for fast-growing foreign companies? “There is so much depth here, there are a lot of [listed peers] for companies to compare themselves to, and a very sophisticated investor base,” Ethridge said. “The investment base is different to any other investment base in the world in the sense they know how to pay for and price growth.”  The ability to explore a listing confidentially doesn’t hurt either.

There is one high profile IPO candidate that stands out from the crop of cloud storage and e-commerce. But when asked whether US automaker Chrysler will follow through with its “will they or won’t they” IPO in 2014, Ethridge is evasive: “We’ll see.”

Correction (Dec 19):Correction:An earlier version of this article gave the impression that the JOBS Act also enabled offshore startups to file confidentially for an IPO, whereas in fact they could already do so. The wording was changed to reflect this.

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