WASHINGTON – The JOBS (Jumpstart Our Business Startups) Act was signed into law by President Obama today, improving access to public markets for emerging, high-growth companies by reducing the costs and regulatory barriers of initial public offerings. The signing ceremony at the White House was attended by William Blair & Company's Brent Gledhill and Brett Paschke, as well as other members of the IPO Task Force, which helped shape the IPO-related provisions of the law.
The law, which also contains several non-IPO related provisions, received overwhelming bipartisan support in Congress and enacts many of the changes proposed last fall by the task force. As one of the three investment banks represented on the task force, William Blair & Company is proud to have helped shape the task force's recommendations for strengthening capital markets in the United States.
"We believe these changes will prove to be an inflection point for American job creation and innovation," said Brent Gledhill, global head of investment banking at William Blair and a member of the task force. "By creating an IPO ‘on-ramp' for emerging growth companies, the JOBS Act will pump oxygen into the ecosystem that funds innovation and economic growth in the United States."
For companies that meet the definition of an "emerging growth company" (see below), the JOBS Act reduces the regulatory burden and expense of going public and increases investors' access to information during and after the IPO process. Companies will have up to five years after their IPOs to scale up to the additional regulatory compliance requirements that apply to all public companies.
"This scaled regulation model maintains vital investor protections and improves information flow while addressing many of the inefficiencies of the IPO process for growth companies," said Brett Paschke, head of equity capital markets for William Blair and a member of the task force. "The law is set up to serve the interests of issuers, investors, and the U.S. economy."
Major IPO-related provisions of the JOBS Act
- Timing: applies to IPOs of "emerging growth companies" that price after December 8, 2011
- "Emerging growth company" (EGC) criteria: less than $1 billion in annual revenue for the last completed fiscal year; EGC status continues until the end of the fiscal year following the fifth anniversary of the IPO or until the company completes a fiscal year with annual revenue of $1 billion, issues more than $1 billion in nonconvertible debt over the previous three years, or becomes a "large accelerated filer" under SEC rules (by having a public float of more than $700 million at the end of the second quarter)
- Confidential S-1 filing: EGCs can submit draft registration statements for confidential review by the SEC; EGCs must publicly file the initial submission and all amendments at least 21 days before the road show begins
- Streamlined financial information in S-1: EGCs can go public with two (rather than three) years of audited financial statements and are subject to streamlined executive compensation disclosure requirements based on rules for "smaller reporting companies"
- Auditor attestation exemption: EGCs are exempt from the Sarbanes-Oxley 404(b) internal control audit requirements
- Increased communication with institutional investors: EGCs can make pre-filing offers to qualified institutional buyers and institutional accredited investors and communicate with them before or after filing the registration statement
- Reduced restrictions on analyst research and participation: Analysts from firms participating in the IPO do not have to wait 40 days after the IPO to publish research; analysts can communicate directly with institutional investors during the IPO process and meet with company management in the presence of bankers
For more information about the JOBS Act, please see the White House's press release.