The U.S. Securities and Exchange Commission (US SEC) has been urging more and more companies to go public for quite some time and it seems that the regulatory authority might be moving closer to the objective. On Tuesday, the regulatory authority released a document which proposes that any company that is planning to go public will get a chance to explore its plans with potential investors before coming up with any decision.
As per the document, the new rule and related amendments would expand the “test-the-waters” accommodation which is currently available to Emerging Growth Companies (EGCs). This latest proposal will allow all prospective users to gauge the market and test the waters before coming to any decision prior to the filing of a registration statement. This latest proposal builds on the popular Jumpstart Our Business Startups Act (JOBS) which was passed in 2012 and is limited to ECGs.
The main thing that goes against JOBS Act provisions is the fact that companies with a higher turnover than $1 billion annually don’t qualify under the JOBS provisions as ECGs and therefore have not benefitted from the JOBS Act provisions intended to foster capital formation in public market. The proposed rule takes into account the action taken by the Division of Corporation Finance in 2017 to extend another EGC reform to all issuers.
Speaking about this latest proposal, SEC chairman Jay Clayton says, “Extending the test-the-waters reform to a broader range of issuers is designed to enhance their ability to conduct successful public securities offerings and lower their cost of capital, and ultimately to provide investors with more opportunities to invest in public companies.”
“I have seen first-hand how the modernization reforms of the JOBS Act have helped companies and investors. The proposed rules would allow companies to more effectively consult with investors and better identify information that is important to them in advance of a public offering,” he adds.
The proposed rule is intended to provide increased flexibility to issuers and help them in their communication with institutional investors about public offerings. The proposal will have a 60-day public comment period following its publication in the Federal Register.
Source: Press Release