A report was released today by the IPO Task Force with recommendations on how to revitalize the IPO market in the US. The report, slides and press release can be found at the NVCA's website, www.nvca.org. Basically, there are four recommendations:
In general, I applaud this report. Most of the recommendations are well-reasoned and welcomed. However, in my opinion, there are a couple of recommendations with which I respectfully disagree. First, the report recommends easing the financial statement disclosure requirements in the IPO registration materials. In my prior experience as an investment banker, these regulations didn't hinder the IPO process in the past, and these financial disclosures provide useful financial information to investors. Second, the report proposes to make the initial S-1 filing confidential, similar to the treatment that foreign issuers are afforded. In my experience, having an S-1 be a public document never served as a disincentive or hindrance to going public. My thinking is that this provision is to enable the US IPO market to have a more even playing field with international markets, but again, in my experience this hasn't been a problem in the past.
All in all, I believe this is an excellent report and should be strongly considered by policy makers.
- Allow Emerging Growth Companies to transition into full compliance with certain SEC reporting and compliance regulations (such as Sarbanes-Oxley) over a period of time.
- Improve the Availability and Flow of Information for Investors. This would be accomplished by increasing the availability of research coverage to Emerging Growth Companies, clarifying safe-harbor provisions, eliminating certain research quiet periods, easing restrictions on analyst communications and allowing confidential filing of IPO registration statements.
- Lower the capital gains tax rate for investors who purchase shares in an IPO and hold them for a minimum of two years.
- Industry Education Efforts. Educate Emerging Growth Companies on the IPO process, from choosing a balanced investment banking syndicate, having the Emerging Growth Company more involved in the IPO allocation process in order to obtain an optimal mix of investors, and improving investor communication.
In general, I applaud this report. Most of the recommendations are well-reasoned and welcomed. However, in my opinion, there are a couple of recommendations with which I respectfully disagree. First, the report recommends easing the financial statement disclosure requirements in the IPO registration materials. In my prior experience as an investment banker, these regulations didn't hinder the IPO process in the past, and these financial disclosures provide useful financial information to investors. Second, the report proposes to make the initial S-1 filing confidential, similar to the treatment that foreign issuers are afforded. In my experience, having an S-1 be a public document never served as a disincentive or hindrance to going public. My thinking is that this provision is to enable the US IPO market to have a more even playing field with international markets, but again, in my experience this hasn't been a problem in the past.
All in all, I believe this is an excellent report and should be strongly considered by policy makers.
