The Securities and Exchange Commission (SEC) is considering permitting private companies of all sizes to confidentially “test the waters” with potential investors before embarking on the initial public offering (IPO) process, according to The Wall Street Journal (link).
This is not a surprise given the other signs that the SEC appears to be trying to level the procedural playing field among companies using different forms of registration.
For example, the SEC announced last June that it permits companies of all sizes to use confidential filing, not just those companies which are subject to the new JOBS Act rules (Click to read article).
Boustead has found, in conversations with the SEC about specific offerings, that the SEC is attuned to the advantages afforded companies using the new forms of registration.
“While the rules are still the rules, we’ve seen an effort by the SEC to work with our clients to reduce some of the differences between forms of SEC registration, where possible.” said Keith Moore, CEO and Founder of Boustead Securities, LLC. a broker-dealer working with clients using Reg A+ and traditional forms of SEC registration.
Given this trend, the rules currently available to companies using the new JOBS Act rules, such as Regulation A, dubbed Reg A+, may eventually be afforded to companies using other forms of SEC registration.
Until then, a private company contemplating an IPO should at least consider using Reg A+ among its options.
For more on Boustead’s experience using Reg A+ for IPOs, click here.
As a timely reminder to those of us who work with public companies, the SEC just charged an investor relations person at a public company with selective disclosure of what was material non-public information.
Those of us who’ve worked with public companies for many years recall the outrageous abuses which prompted Reg FD in order to promote full and fair disclosure of material financial information.
Even after Reg FD, however, occasionally company executives forget or get sloppy about following the disclosure rules strictly.
This case, then, is a valuable reminder to us all. Please click here to take you to the article by Holland & Knight which describes the circumstances of the case.
The new JOBS Act, intended to make it easier for smaller companies to raise capital, was signed into law by the President on April 5th.
First, let me say that I welcome the reduction in the regulatory burden on smaller companies. I hope this spirit of deregulation will be extended to existing small cap public companies which continue to operate under the old burdens.
However, some needed changes to encourage capital formation by smaller companies aren’t as easily handled through legislation. For example, thin liquidity in many small cap stocks has several causes and would require several fixes. Lack of liquidity, therefore, will likely continue to plague smaller cap stocks.
Also, we can’t legislate good judgment. Even under the former, so-called stricter rules, investors shoveled money into Chinese stocks, many of which proved to be unwise investments. The new JOBS Act places even greater responsibility on investors to exert good judgment.
Experience tells me that companies considering raising capital should take advantage of these relaxed rules as soon as possible before some visible blow-ups or disasters trigger re-tightening of the rules.
The following links provide helpful summaries and analyses of the JOBS Act. Thank you.