On Capitol Hill, bipartisan measures to support reduced regulatory initiatives for small to midsize companies seeking to go public is gaining steam. Targeting job growth to boost the nation's economy and housing markets, the co-authored bill calls for the easing of mandates contained within the ""Dodd-Frank Act"":www.sec.gov/about/laws/wallstreetreform-cpa.pdf and the ""Sarbanes Oxley Act"":www.soxlaw.com/.[IMAGE]
U.S. Senators Mark R. Warner (D-Virginia), Mike Crapo (R-Idaho), Pat Toomey (R-Pennsylvania), and Charles Schumer (D-New York) recently announced the ""Reopening American Capital Markets to Emerging Growth Companies Act of 2011"":http://thomas.loc.gov/cgi-bin/query/z?c112:S.1933. Through the legislation, the senators hope to remove roadblocks for a company's initial public offering by altering the pace at which organizations are required to meet expensive obligations in terms of investor protections.
Citing the enormous job growth seen in companies that choose to go public, the lawmakers noted the negative impact of dwindling numbers of organizations taking themselves public in recent years. The group of senators stated that the administrative and compliance burdens have been the key cause of the sagging statistics, and the proposed bill would provide greater access to capital for such companies, indirectly giving the country's employment a boost.
The senators referenced studies that show general job growth of around 90 percent among companies who go public when presenting their legislation, and the men went on to point out the lengthy timeline now established for companies working toward going public, stating that it now takes an average of 9.4 years for a company to do so. The nearly decade long timeline is[COLUMN_BREAK]
double the average seen in the 1980s, which totaled about five years. Additionally, the writers of the bill mentioned that the cost for an organization going public is around $2.5 million, with another $1.5 million added annually just to stay public.
The legislation seeks to establish a segment of ""emerging growth companies"" that would have the benefit of a five-year compliance plan for going public. The companies categorized as such would include those that have up to $1 billion in annual revenue upon registration with the ""U.S. Securities and Exchange Commission"":www.sec.gov/ and around $700 million in publicly traded shares when making an initial public offering. Such groups would get five years to meet certain obligations, unless the $1 billion in revenues or $700 million in shares standards are met first, in which case those targets would mandate compliance.
The senators creating the bill believe that between 11 and 13 percent of all companies may qualify, and they also estimate that around 3 percent of total market capitalization would qualify under the law. Generally, the legislation, would change outside auditing requirements, alter SEC registration procedures, provide an exemption from stockholder votes on executive compensations, extend the amount of information and research release by the emerging companies, and allow confidential filing with the SEC to ""test the waters.""
Commenting on the recent measure, Sen. Warner said, ""Encouraging more companies to go public instead of remaining private or waiting to be acquired will increase the vibrancy and competitiveness of the American economy. It also will encourage the sort of innovation and entrepreneurial activity that creates jobs and can help to turn this economy around. Smarter regulation can improve our markets and ultimately make them more attractive for both investors and entrepreneurs, and this legislation will move us closer to that.""
Echoing Sen. Warner's sentiments, Sen. Schumer stated, ""During difficult economic times, it is critical that we give growing innovators the breathing room that they need to access public markets. The vast majority of job creation occurs after companies go public so it makes sense to make the IPO process easier for emerging firms. This is a commonsense set of reforms that can bridge the partisan divide and have a real impact on job creation.""