Lise Buyer, a whipsmart former technology analyst turned IPO whisperer who helped Google prep for its 2004 public offering, thinks Facebook may be the last fast-growth tech stock individual investors will be able to bet on for a long while.The reason, she told Fortune’s Dan Primack: the recently passed JOBS Act allows companies to stay private until they have 2,000 shareholders.
Under the old rules, companies had to start disclosing their financials like a public company after they had 500 shareholders—so companies like Google and Facebook decided they might as well go public.
The changes are good news for early investors and employees, who will reap more of the gains:
[We] can expect early investors and high-net-worth folks to hold on through the entire growth phase, since by the time a company has 2,000 shareholders, it is much more likely to exhibit growth patterns associated with more mature entities.
It’s a smart argument. But with the growth of secondary markets which allow for the trading of private shares, and deals in which later-stage investors cash out employees and angel investors, that’s been happening anyway.
It’s a far cry from the ’90s, when individual investors could place wild bets on Internet companies which were going public with double-digit headcounts and barely any revenues, let alone profits.
UPDATE: We asked Buyer to expand on her thoughts, and she shared the following:
It isn’t that there won’t be rapidly growing technology IPOs, but rather there won’t likely be deals of this size and stature at this point in a company’s evolution. Very few companies ran into the 500-shareholder rule; it was only the behemoths like Google and Facebook. Most tech IPOs will not be affected; it’s only the very large, consumer brand-name standouts, those that might have bumped in to the 500-shareholder rule, that are no longer likely to share the wealth with smaller individual investors.
So hold out hope. There may be interesting tech IPOs in the future—just not ones whose names you recognise.