Under the leadership of its newest chairman, Jay Clayton, the SEC has for the last two years made it clear that it wants more companies to go public already.
A new proposal, revealed today, may get it closer to that objective. Specifically, the agency has proposed giving any company that’s exploring a potential IPO to explore its plans privately with potentially investors — both institutional and accredited — before making any public pronouncements.
It would essentially widen the net to allow every company to “test the waters” before deciding whether or not to move forward with an offering, compared with the companies that are able to test the waters today, which are “emerging growth companies.”
Per the SEC’s definition, an emerging growth company is issuer with total annual gross revenue of less than $1 billion during its most recently completed fiscal year.
The public now has 60 days to comment on the proposal, after which the SEC will decide whether or not to move forward.
You can pretty much expect that it will. The move follows a series of steps the SEC has taken to shift some of the liquidity sloshing around the private market over to the public market. In July 2017, it made it possible for any company to confidentially submit registration documents related to shares being sold in an IPO, a benefit that only smaller companies had enjoyed previously.
Acknowledging that companies may still choose to stay private longer, Clayton separately said last August that the commission wants to give more small investors access more privately held companies for their retirement or other needs. He said that changes toward that end could happen “pretty quickly,” though the SEC hasn’t formally revealed any related proposals yet.
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