234 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
11.7 Mini-IPOs
The Act also makes it easier for a company to raise a more substantial amount
of capital without becoming an SEC reporting company by amending Section
3(b) of the Securities Act to exempt from registration any class of equity, debt,
or convertible debt securities sold in an offering where the aggregate offering
amount in any 12-month period does not exceed $50 million. This assumes
that the issuer les audited nancial statements each year following the offer-
ing and complies with any other rules to be developed by the SEC.
This amendment effectively expands the existing exemption under
Regulation A, which allows a private company to raise up to $5 million from
the public using a more streamlined disclosure than a typical PO and without
registering the offering with the SEC or becoming an SEC reporting company.
11.8 Emerging Growth Company IPOs
Last, the JOBS Act makes it easier for EGCs to raise capital in the public mar-
kets by exempting them from a number of current and proposed regulations
applicable to companies contemplating an IPO, and once they are public.
The idea is to stimulate the economy by offering edgling companies a rela-
tively easy entry into the IPO thruway.
An EGC is dened as any issuer that had total annual gross revenues of
less than $1 billion in the last scal year. An EGC retains that status for up to
ve years after its IPO (it may lose that status earlier if revenues reach more
than $1 billion, if it issues more than $1 billion in debt, or oats more than
$700 million in stock). Companies that went public before December 8, 2011
do not qualify for EGC status.
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Under the JOBS Act, EGCs would have to report only two years of
audited nancial statements when they go public (as opposed to three years
for income statements, and ve years for select nancial data under current
law). Underwriters participating in an EGC’s IPO are able to issue research
reports on the EGC’s stocks ahead of offerings, a practice that is currently
prohibited. Additionally, EGCs will be exempt from certain disclosure
requirements regarding executive compensation.
The bill received bipartisan support, passing with a 390 to 23 vote in
the House of Representatives. Supporters believe the bill targets rules that
are impediments to growth, and makes it easier for young companies to
raise capital and conduct IPOs. In a March 7 Senate Hearing, Senator Chuck