Congressional leaders of both parties have a short-term opportunity to come together in rare bipartisan fashion and get on the right side of American economic growth and job creation. With the House expected to pass a bill this week that would temporarily ease regulatory requirements related to young, high growth companies filing for an initial public offering, the Senate is positioned to take up its own version of this same initiative (S 1933) in the coming days. With the continuing job crisis in America and the need for more U.S. innovation—the strong point of young companies—it’s time for both houses of Congress and both political parties to come together to pass this critical proposed legislation. And it won’t cost taxpayers a dime.
Notwithstanding the recent spate of social media IPOs and the pending blockbuster initial public offering of Facebook, the IPO market for young growth companies remains troubled. While mega-IPOs make great headlines, there are simply not enough companies going public in America to sustainably support our economic health and growth. Citing the costs and complexity of complying with increasingly stringent regulatory requirements, enacted in the aftermath of abuses by a few high-profile public companies, many CEOs and their investors in recent years have chosen to sell their companies instead of going public. When you consider that 80 percent of job growth from young companies comes post-IPO, there is a serious long-term job crisis in the making if the impediments to IPOs cannot be addressed. When large companies acquire young growth companies, job growth and additional technology development usually slows significantly. This is why independent companies and their IPOs are essential to growth.
The Senate bill, as currently drafted, would apply to young growth companies with revenues less than $1 billion per year and would provide an easier “regulatory on-ramp” for the first five years after their IPO. In addition to offering temporary relief from onerous and costly provisions, such as Sarbanes Oxley Section 404 B, the measures also allow these companies to more effectively communicate with investors before, during and after their IPO. They enable an expanded range of pre-filing communications and creating additional safe harbors for more analyst research coverage. The provisions also permit confidential pre-filing of draft registration statements for emerging growth companies, which will help companies protect competitive information while they’re still evaluating the feasibility of an IPO.
The reforms in S 1933 would reduce the unreasonable burdens that keep many CEOs away from the public markets and cap the growth of their companies. In drafting S 1933, the Senate has shown a rare ability to work across party lines to address the needs of job growth and innovation in America. The bipartisan Senate leadership of Charles Schumer (D-NY), Pat Toomey (R-PA), Mark Warner (D-VA), and Mike Crapo (R-ID) is to be commended. Now is the time for this bill to be brought to the floor of the Senate and for the full body to rally to the cause of economic growth in America and expediently pass this bill. If you’re an entrepreneur or investor, you should contact your senators and urge them to work for swift passage.
