In a near-unanimous bipartisan vote of 54-1, the House Financial Services Committee tonight passed legislation introduced by U.S. Representatives John Carney (D-DE) and Stephen Fincher (R-TN) to make it easier for small and medium sized companies to undertake an IPO and become a public company.
H.R. 3606, the Reopening American Capital Markets to Emerging Growth Companies Act of 2011, would reduce the costs of going public for these companies by phasing in certain regulatory requirements. Over the last ten years, the number of companies going public has fallen dramatically, hurting the ability of small companies to grow, innovate, and hire new workers.
The legislation creates a new category of issuers, called "emerging growth companies," that have annual revenues of less than a $1 billion and following the initial public offering (IPO), less than $700 million in publicly traded shares. Exemptions for these "on ramp" status companies would end either after five years, or when the company reached $1 billion in revenue or $700 million in public float. The Obama Administration supports the IPO "on ramp."
"I'm encouraged by today's developments and I look forward to a vote on the floor of the House of Representatives in the near future," said Congressman Carney. "Making it easier for small and medium sized companies to grow is the best way to create jobs and grow the economy. This legislation will encourage more entrepreneurs to start businesses and allow more start-ups to become public companies."
The legislation will also make it easier for potential investors to get access to research and company information in advance of an IPO. This is critical for small and medium-sized companies trying to raise capital that have less visibility in the marketplace. Currently, there are regulations in place that make it difficult for investors to find the detailed research reports they need to make an informed decision about new companies.