Reforms Would Spur Job Creation by Boosting Smaller Companies’ Access to Capital
Dec 02 2011
Contact: Kevin Hall - (202) 224-2023
WASHINGTON, D.C. — U.S. Sens. Mark R. Warner (D-VA), Mike Crapo (R-Idaho), Pat Toomey (R-PA) and Charles Schumer (D-NY) today announced a bipartisan plan to make it easier for growing firms to go public so they can expand and create jobs. The proposal would make it easier for small and medium-sized companies to access capital through public markets.
Studies show that more than 90 percent of job growth occurs after companies go public, but fewer small and medium-sized companies are taking this step in recent years, often citing the administrative and compliance burdens as the main obstacles to going public. The bipartisan bill, known as The Reopening American Capital Markets to Emerging Growth Companies Act of 2011, would reduce these hurdles of an initial public offering by phasing in many of the costliest obligations over time while maintaining key investor protections.
“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,” Sen. Warner said. “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.”
“This on-ramp proposal will make it easier for young, innovative companies to access the public markets and ultimately the capital they need to grow and create jobs,” Sen. Crapo said. “It will reverse the decline we’ve seen in IPOs over the last decade by temporarily scaling back certain regulatory requirements imposed by the Sarbanes Oxley Act and the Dodd Frank Act, positively impacting job creation in the United States. The IPO Task Force estimates that the average cost for a company to go public is $2.5 million, and the annual cost to stay public is $1.5 million."
“In this struggling economy, Congress should do everything it can to make it easier for small businesses to grow and create new jobs,” Sen. Toomey said. “This legislation will make it easier for firms to go public and in turn, create many more jobs. This legislation offers a bipartisan path for Congress to help get our economy moving again.”
“During difficult economic times, it is critical that we give growing innovators the breathing room that they need to access public markets,” Sen. Schumer said. “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.”
In a recent survey conducted by Nasdaq and the National Venture Capital Association, 86 percent of chief executive officers cited “accounting and compliance costs” and 80 percent cited “regulatory risks” as key concerns about going public. With companies taking longer than ever to go public – on average 9.4 years, compared to fewer than five years in the 1980s – rapid expansion and job growth is being delayed, and the senators’ legislation aims to accelerate the expansion and job growth made possible by accessing public markets.
The senators’ bill would establish a new category of issuers, called “emerging growth companies” that have less than $1 billion in annual revenues at the time they register with the U.S. Securities and Exchange Commission and less than $700 million in publicly-traded shares after the IPO. The legislation creates a transitional “on-ramp” status for these companies to encourage them to go public. The “on-ramp” period would last as many as five years, or until a company reaches $1 billion in annual revenue or $700 million in publicly-traded shares. Full compliance with certain obligations would be phased in during that period.
The bill text is available here.