Maybe, but there are a lot of factors that drive IPO decision making and I don't think this would be a huge one. It's not only traded on established securities

Maybe, but there are a lot of factors that drive IPO decision making and I don't think this would be a huge one. It's not only traded on established securities market, it's also "readily available on secondary markets". Basically, if there's a significant number of shares trading hands between parties on an ongoing low-friction basis it's going to be subject to the tax rules. Which means a company that wants to have a really large pool of investors wouldn't be able to skirt this by just not listing. I think this law could affect the number of IPOs at the margins, but I suspect it wouldn't be the fundamental consideration for a lot of companies. I think if this law was paired with one that treated putting shares as a collateral for a loan as a taxable event (that is, if you use your shares as the collateral for a loan, those shares are taxed as capital gains at the value that they were assigned as collateral) it would mitigate most of the "IPO avoidance" concerns, since another primary tax avoidance strategy would also be shut down.