Law Blog Category: IPO
On April 5, 2012, President Obama signed the Jumpstart our Business Startups Act (JOBS Act) into law. The JOBS Act was passed on a bipartisan basis by overwhelming majorities in the House and Senate. The Act seeks to remove impediments to raising capital for emerging growth public companies by relaxing disclosure, governance and accounting requirements, easing the restrictions on analyst communications and analyst participation in the public offering process, and permitting companies to “test the waters” for public offerings. The following is an in-depth review of Title I of the JOBS Act related to Emerging Growth Companies.
As a reminder, on April 5, 2012 President Obama signed the JOBS Act into law. Part of the JOBS Act is the Crowdfunding Act, the full title of which is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012”. The Crowdfunding Act creates a new exemption to the registration requirements under a newly designated Section 4(6) of the Securities Act of 1933, as amended. Although the Crowdfunding Act is, by definition, an exemption from the registration requirements and therefore a new form of private placement, innovative and forward thinking minds have already come up with a method of utilizing the crowdfunding methodology for a public, registered offering.
First, I’d like to give credit to The DealFlow Report which was my initial source for the numerical factual information in this blog.
The Numbers and Facts
Q2 reflects the uncertainty that goes along with an election year and the concerns over tax increases (or decreases) that go along with election years. There also remains the ongoing worry over European markets. In short, it is a time of change and uncertainty. Moreover, according to Adam Lyon, a managing director and co-head of private capital at Conaccord Genuity, the small cap financing market, “is probably in for the usual seasonal fluctuations: a tough summer followed by a pick-up in late August and September.” I note that my law firm has seen this trend consistently for the past decade.
I’ve written extensively on the Crowdfunding Act, or Title III of the Jobs Act, and much less extensively on the other five titles of the Act. Today’s blog will focus on Title I of the Jobs Act – Reopening American Capital Markets to Emerging Growth Companies. Several industry types have been referring to Title I as the IPO On Ramp and so will I.
As I recently blogged, the President has signed the Jobs Act including the much anticipated Crowdfunding bill. Crowdfunding is a process whereby companies will be able to raise small amounts of money either directly off their own website or using intermediaries set up for the purpose. The Securities Act of 1933, as amended, (Securities Act) prohibits the sale or delivery of any security unless such security is either registered or exempt from registration. Crowdfunding will be an exemption from registration. The exemption will likely be codified as a new and separate exemption likely under Regulation D and will include an overhaul of the current general provisions of Regulation D found in Rules 501-503.
”Gunjumping” is the dissemination of information regarding the Issuer before a complete prospectus has been filed with the Securities and Exchange Commission (“SEC”). Communications prior, during and immediately following the filing of a registration statement are strictly regulated to prevent an Issuer from hyping the market in association with an offering. In addition, the SEC wants to ensure that investors decisions to participate in an offering are based on information that has been reviewed by the SEC and meets the disclosure standards set forth in the securities laws.
Initial Public Offerings (IPO’s) are on the rise once again. I have potential clients calling me daily interested in going public through an IPO, most have little or no prior knowledge of the public company arena – so back to basics. An IPO is an initial public offering of securities. Prior to proceeding with an IPO, an Issuer should consider the advantages, disadvantages and alternatives.