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There is an old saying that there is nothing new under the sun (nihil sub sole novum for those who prefer Latin), and the saying is often proved to be true. Take movies for example. Many of the most popular movies are remakes of older movies. We also see many fashion trends repeat themselves too. Who would have thought that bell-bottom pants would have once again become popular in the 2000's after being panned as one of the worst fashion trends from the 70's during the 80's and 90's. Well, it appears that local stock exchanges may be given another go as a way for smaller businesses to raise money to grow.




In January, Michigan enacted the Michigan Investments Bill ("MI Bill"), which essentially paved the way for a local stock exchange to once again be possible. During the late 1800's and into the early 1900's there were a number of local stock exchanges. However, following the stock market crash of 1929, Congress enacted the Securities Acts of 1933 and 1934 that imposed stringent requirements on publicly traded companies. This in turn made it more difficult for local exchanges to survive, because of its was cost prohibitive for smaller companies to meet the these stringent requirements. The New York Times observed in an opinion piece on the subject that those costs have risen over the years and while $10 million initial public offerings were somewhat common 25 years ago, the median initial stock offering today is closer to $140 million.


The MI Bill basically takes the idea of crowdfunding to the next level. According to the Oxford Dictionary, "Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people[.]" While crowdfunding is a popular way for entrepreneurs to raise money for their business ideas, it does not allow for those contributing to the funding to own and/or trade shares in the company they invest in. By putting a framework in place to allow a local market to exist, investors can have a chance at making a profit on their investment by buying and trading shares in smaller local companies. This in turn may make investing in a smaller or upstart company more appealing to would be investors. Other states have taken notice of this opportunity as well, and this month Texas became the 13th and most populous state to enact similar legislation. It will be interesting to see whether or not local markets will once again be a place where investors will look to buy and trade shares as they once did a century ago and what the impact on local businesses might be.