We saw NASDAQ’s Adena Friedman speak last week at the FMA Boston 2017 conference. (Calcbench was a sponsor.) Naturally the question arose about the declining numbers of public companies in the United States. There wasn’t time for a thorough discussion, but we were reminded of this presentation NASDAQ put out in the spring.

The conclusion is that reducing the regulatory burden on public companies will encourage more companies to become public.

Now, it’s always good to reevaluate regulatory burden on a regular basis, but we wonder if overall, NASDAQ is missing the point. Is the issue really about too much regulation of public companies, or a complete lack of regulation within the recent phenomenon we call the ‘unicorn’ space?

In other words, we argue that many large, fast-growing companies won’t go public, because they get the benefits of being public already, without doing any of the work.

Let’s take a look at one prime example, Uber.

We used to think of venture-capital backed companies as the playground of accredited investors only. Clearly this is not the case anymore. Major investors in Uber include Vanguard, Fidelity, and T. Rowe Price, as well as various pension funds.

Wait, what? Retail investors can buy a mutual fund that has Uber in its holdings? Yes, they can.

But can those same investors request a copy of Uber’s financials? No, they cannot. So… the confidential financials that (we hope) the fund manager has access to—can investors assume those are audited to the same standard as a public company? Definitely not.

Also, can we expect that Uber’s management is keeping a careful watch over its internal controls and procedures? Ha! Just asking that question gave us a good chuckle, given all Uber’s recent scandals.

In other words, all of the rules that were put in place to make sure public companies don’t scam retail investors do not apply here, and yet companies like Uber are still collecting retail money.

Clearly, this is not good for the IPO market. Why buy the cow when you can get the milk for free? But it’s also just not good.