Over the 44 years between 1980 and 2024, there were 9,253 initial public offerings (IPOs) — an average of approximately 210 per year. But something’s happened in recent years and companies simply aren’t going public at nearly the same volume as they once did.
According to researchers at the University of Florida’s Warrington College of Business, over the last three years, from 2022 to 2024, there have been only 164 IPOs total.
Why are these statistics important? Because the fact that the number of IPOs issued annually has fallen far below their historical average may be the motivating force behind President Donald Trump’s bombshell suggestion earlier this week in which he suggested public companies should stop reporting earnings on a quarterly basis.
Let’s dive into that idea and what it would mean. But first: can President Trump make this change with a stroke of his own pen?
The answer is no.
The SEC Would Have To Allow Public Companies To Alter Cadence Of Earnings Reports
As Investopedia has explained, companies are required to follow the strict rules laid out by the U.S. Securities and Exchange Commission (SEC) when they go public, including filing earnings reports that detail how the company has been performing. More specifically, the SEC has required public companies to report their earnings on a quarterly basis for more than 50 years, since 1970.
“The timing of earnings reports varies a little depending on the details,” Investopedia noted. A previous standard “required that companies must file earnings reports no later than 45 days after the end of their first three quarters, and both quarterly and annual reports [were] due no more than 90 days after their fiscal year ends,” but in 2002 the SEC “decided to make information available to the public in a more timely manner” and “new rules tightened these 45- and 90-day requirements to 35 and 60 days respectively.”
What all of these regulations mean is that President Trump cannot dictate this change alone. Any amendment to public company disclosures must come from the SEC, most likely in the form of an official rulemaking, which means the public and interested parties must be allowed to opine on the president’s suggestion. This process would take years.
SEC leaders suggested yesterday that they already have begun work to make the change that President Trump wants. Yesterday, CFO Dive reported that a commission spokesperson said, “At President Trump’s request, Chairman [Paul] Atkins and the SEC are prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies.” The spokesperson did not offer additional details and declined to comment further on what steps need to be taken by the SEC to change the quarterly reporting requirement.
Why Does President Trump Want To Get Rid Of Quarterly Earnings Reports?
AXIOS said it is “unclear what prompted the president’s call,” but over the last several years, and in particularly since the last election, Republicans have been calling for increased deregulation of capital markets. They believe reducing the burden on public companies could encourage more private companies to go public.
Indeed, in his social media post earlier this week, President Trump said public companies should shift their earnings reports from a quarterly cadence to every six months in order to “save money, and allow managers to focus on properly running their companies.”
Monday was not the first time the president called for a change in the cadence of public company earnings reports. As Politico noted, this week’s social media echoed a similar call President Trump made in 2018 at the behest of then-PepsiCo CEO Indra Nooyi. At the time Nooyi reportedly preferred to issue earnings reports two times a year instead of four. (The language in Monday’s post is very similar to what President Trump said in 2018.)
As CFO Dive recalled yesterday, four months after that 2018 pronouncement the SEC issued a formal request for comment on “how we can enhance, or at a minimum maintain, the investor protection attributes of periodic disclosures while reducing administrative and other burdens on reporting companies associated with quarterly reporting.” The document said the SEC was seeking comments on whether its rules should provide “flexibility” on the frequency of the periodic reporting that would free corporate executives from focusing on short-term results or what it called “short-termism,” while maintaining “appropriate investor protection.”
The SEC dropped the rulemakingprocess after President Joe Biden won the 2022 election.
The Cons Of Moving Away From Quarterly Earnings Reports
As AXIOS said, the shift that President Trump has proposed “could have huge implications for Wall Street, financial markets, companies, and traders.”
Given those incredible implications, how have industry players and observers reacted?
Some, not so well.
In his post, President Trump suggested burdens on U.S. companies should be reduced because Chinese firms do not operate under similar rules. That argument does not appear to be a winning one. “I didn’t really realize that is the direction we were really wanting to take American capitalism,” Interactive Brokers Chief Strategist Steve Sosnick told AXIOS. Sosnick also suggested fewer earnings reports could mean less clarity, which could increase market volatility.
According to Morning Brew, Sosnick is not alone. “Many shareholders and academics worry that less frequent reporting will reduce transparency, increase market volatility, and leave investors less able to make informed decisions,” the media company said in its daily newsletter.
Erik Gerding, former director of corporate finance at the SEC, agreed. He also criticized the president’s idea, telling AXIOS that investors “have come to expect quarterly reporting and will exert pressure on companies to continue to provide quarterly reporting.”
The Wall Street Journal picked up on that theme. “The move is likely to face opposition from investors who rely on the transparency of regular disclosure and crave more,” the newspaper said. “Quarterly earnings reports typically go hand-in-hand with earnings calls that allow analysts to ask questions of company executives.” The Journal also talked to concerned investors. “One of the reasons I invest in public companies instead of private companies more often is because you get that information,” said James McRitchie, an individual investor in roughly 350 companies. “Timeliness is important.”
Market volatility and transparency are not the only potential problems.
Professor Salman Arif from the University of Minnesota’s Carlson School of Management told NPR that moving to reporting earnings twice a year could potentially lead to illegal activities by companies because there would be fewer chances for investors to scrutinize their financial numbers. “If we want to reduce accounting fraud, reduce opportunities for insider trading, improve the strength of our capital markets, and allow companies to invest for the long run, I think more transparency is truly beneficial,” Arif said.
The Pros Of Moving Away From Quarterly Earnings Reports
AXIOS noted “the case for less frequent quarterly reports is not without its fans,” however.
In fact, in a Wall Street Journal column written in 2018, JP Morgan’s Jamie Dimon and the “Oracle of Omaha” Warren Buffett argued “quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability.” AXIOS also noted the United Kingdom switched back to semiannual earnings after briefly pivoting to the quarterly model. Other European nations also have done away with quarterly requirements.
According to AXIOS, among the stakeholders that are likely to support the move away from quarterly earnings are:
- CEOs “who would prefer not to deal with sell-side analysts and investors four times a year”;
- Smaller companies with fewer resources; and
- Public markets since “the pressure of quarterly earnings discourages firms from going public sooner.”
So, will changing earnings statement requirements increase the number of IPOs?
The jury is out, but Morning Brew did note that the CFA Institute studied what happened after the United Kingdom moved from a four- to a six-month earnings report cadence.
The result? “It didn’t affect how much companies invested, but did reduce the accuracy of analysts’ forecasts.”