Legislation designed to make it easier for emerging growth companies to go public has advanced in the US House of Representatives, according to the Wall Street Journal. The legislation applies to companies that have less than $1 billion in annual revenue at the time they register for their IPO and that have under $700 million in publicly traded shares. These companies would for a period of time be exempt from certain provisions of Sarbanes-Oxley , which requires significant requirements regarding a company's internal controls.
In my view, this is a very good step towards addressing the IPO crisis in America. However, this legislation alone won't solve the problem and more work needs to be done. Additional areas that need to be addressed include: the broken business model for investment banks to support smaller public companies (inadequate compensation for investment banks's research departments that cover these companies and inadequate trading profits for investment banks that support these companies); the dearth of boutique investment banks servicing smaller companies (the bubble-era disappearance of the "four horsemen" - Hambrecht & Quist, Montgomery Securities, Alex. Brown and Robertson Stephens); and other regulations that have combined to effect the deterioration of the IPO market for smaller companies.
Link to the Wall Street Journal article (full article requires subscription): http://online.wsj.com/article/SB10001424052970204880404577227853616803384.html?KEYWORDS=ipo+bill
In my view, this is a very good step towards addressing the IPO crisis in America. However, this legislation alone won't solve the problem and more work needs to be done. Additional areas that need to be addressed include: the broken business model for investment banks to support smaller public companies (inadequate compensation for investment banks's research departments that cover these companies and inadequate trading profits for investment banks that support these companies); the dearth of boutique investment banks servicing smaller companies (the bubble-era disappearance of the "four horsemen" - Hambrecht & Quist, Montgomery Securities, Alex. Brown and Robertson Stephens); and other regulations that have combined to effect the deterioration of the IPO market for smaller companies.
Link to the Wall Street Journal article (full article requires subscription): http://online.wsj.com/article/SB10001424052970204880404577227853616803384.html?KEYWORDS=ipo+bill
