Just two days before the Securities and Exchange Commission is expected to approve final rules for equity crowdfunding under Title III of the Jumpstart Our Business Startups Act (JOBS), Chairwoman Mary Jo White offered an informal review of the impact of that legislation, extolling its success.
She told the a gathering of securities attorneys in New York City on Wednesday that since the JOBS Act was enacted in April 2012, emerging growth companies – companies with total annual gross revenues under $1 billion – have accounted for 85% of initial public offerings. In addition, she said, nearly 1,000 EGCs have confidentially submitted draft registration statements for IPOs, which precede offerings.
“Companies began to take advantage of the initial public offering ‘on-ramp’ as soon as the JOBS Act was enacted,” said White, referring to the maximum five-year period that companies have following their IPO to fully comply with various SEC disclosure and accounting requirements.
The JOBS Act has made it easier for companies to issue stock for the first time and for investors to access those shares. It has been implemented on a gradual basis. First was Title II of the Act, which allowed accredited investors with a minimum $1 million in net worth or income above $200,000 for the previous three years to get an equity stake in a company in exchange for their crowdfunded contribution, beginning in late September 2013.
Then came Title IV, known as Regulation A+, effective June 2015, which let unqualified investors who participated in crowdfunding offerings get an equity stake so long as they didn’t invest more than 10% of their income or net worth per year. Companies, in turn, could raise up to $20 million under Tier I following review by state regulators or up to $50 million under Tier II, after a review by the Securities and Exchange Commission.