Lummis, Sinema, Warner, Hagerty Introduce Bill to Make It Easier for Main Street Businesses to Go Public

Press Release

Last week, U.S. Senator Cynthia Lummis (R-WY) and her colleagues Kyrsten Sinema (D-AZ), Mark Warner (D-VA) and Bill Hagerty (R-TN) introduced a bill to help reduce the costs incurred by small and medium-size Main Street businesses when they conduct an initial public offering (IPO) and "go public," trading company stocks on a stock exchange. Their bill, the Middle Market IPO Underwriting Cost Act, would require the Securities and Exchange Commission to issue a report on the direct and indirect costs of a traditional IPO and compare those costs with the cost of obtaining alternate forms of financing. The SEC would also have to report on recent trends in IPO offerings, and the costs incurred.

Similar legislation was sponsored in the U.S. House of Representatives by Rep. Jim Himes (D-CT) in 2018.

"We need to bring our financial sector into the 21st century, and that means looking at new, innovative ways to do things like initial public offerings," Senator Lummis said. "Big companies figured out years ago that they could reduce costs by changing IPO fee structures. Wyoming is full of small and mid-sized companies and they should not be penalized simply because of historic fee structures and restrictions on how IPOs are funded. I am honored to work with Senators Hagerty, Sinema and Warner on this important legislation."

"Our commonsense, bipartisan bill boosts Arizona businesses by making it easier to grow and create jobs. By going public, Arizona businesses will be able to give everyday Arizona families the opportunity to invest directly in their businesses and build wealth for the future. We'll continue working across the aisle to fuel economic opportunities across our state," said Senator Sinema.

"When our companies become publicly traded, more Americans can participate in their growth and success," Senator Warner said. "Small and mid-size firms play a key role in our economy, and this bill will help give investors a clearer picture of the costs and challenges such companies can face when they take that important step."

"As someone who spent their career in business, I am well aware of the challenges and regulatory requirements it takes to conduct an initial public offering, which can be very costly," Senator Hagerty said. "It's important that Congress gain a better understanding of the evolution of these burdens and costs, which is why I'm pleased to co-sponsor this legislation that requires the SEC to report back its findings on the current trends."

About the bill, Robert Jackson, co-director of the Institute for Corporate Governance and Finance at New York University School of Law, said, "For years, the middle-market IPO tax has made it harder for small companies to raise the public capital they need to create the jobs our economy depends upon. This important legislation would make sure that the SEC finally grapples with how Wall Street taxes middle-market companies--and gets to work on making American capital markets work for businesses of all sizes."

When going public, companies tend to hire an underwriter and other professionals like attorneys and accountants to help prepare the IPO. Underwriters, serving as intermediaries between companies and prospective investors, typically receive a set percentage of the IPO price as compensation for their work. Large companies have in recent years been able to negotiate lower percentages for this process, which reduces the overall fee. At the same time, smaller companies have continued to pay the same historic percentage for this service.

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