September 19, 2011

Crowdfunding: Should More Companies Be Going Public?

Recently, I’ve blogged several times about the SEC’s upcoming efforts to engage in capital-raising reform – particularly for pre-IPOs. This is a big topic for Rep. Darrell Issa. Thanks to Michelle Leder of for catching the 25 words that President Obama devoted to this topic during his recent jobs speech. Here’s the President’s Fact Sheet that also references it.

Soon afterwards, the SEC announced the formation of the Advisory Committee on Small and Emerging Companies – this press release included this note:

The committee is intended to provide a formal mechanism through which the Commission can receive advice and recommendations specifically related to privately held small businesses and publicly traded companies with less than $250 million in public market capitalization.

Then on Friday, the House Oversight & Government Reform committee held hearings on crowdfunding (see this Cooley alert previewing the hearing) at which Corp Fin Director Meredith Cross delivered this testimony. As noted in this WSJ article:

SEC Corporate Finance Division Director Meredith Cross, in a House hearing, said the key to easing restrictions on crowd-funding would be to create an exemption “that wouldn’t present significant concerns of fraud.” “Then I see real benefits,” Ms. Cross told a subcommittee of the House Committee on Oversight and Government Reform. “If it becomes viewed as a tainted market where people go to fraudulently steal money, then that won’t help anyone.” The SEC is currently looking at easing restrictions on crowd-funding as part of a wide-ranging review of its rules governing capital-raising. Cross said her remarks reflected her personal views, and that the SEC hadn’t yet weighed in on the matter. She said she expected the agency to complete its broad review in the near future.

This Cooley alert covers Meredith’s testimony in greater detail. And this Cooley alert covers another House effort to end the ban on general solicitation. Love this excerpt from that memo:

And you think you already get a lot of junk mail? So can we now look forward to seeing clever entreaties for funding pasted onto every frozen burrito at Safeway and every pair of socks on sale at Target?

The ironic part about this Congressional obsession with getting more companies public is that it was widely reported on Friday that this year has become a record one for scrapped IPOs. As noted in this article, a total of 215 IPOs have been withdrawn or postponed so far in 2011. These were scrapped due to market conditions, not SEC regulatory restrictions.

Groupon’s Gun-Jumping Saga: Will It Ever End?

Back in June, I blogged about potential gun-jumping by Groupon in the wake of the company filing a Form S-1. Since then, there have been several other instances of Groupon potentially gun-jumping (eg. memo to employees leaked to this popular blog). I imagine some are questioning whether Groupon’s management team has tough enough skin to run a public company as they can’t seem to take criticism. Anyways, DealBook reported that the company was considering delaying its IPO, with gun-jumping cited as one of the factors.

As for Groupon’s Form S-1 amendments, it’s too early to tell if the company’s filings have caught up with the potential gun-jumping incidents (and Corp Fin comments on such) as the last amendment was filed a month ago: Pre-Effective Amendment No. 2. I didn’t read this latest amendment too closely – but at a glance, the only unusual part seems to be this “Letter to Potential Stockholders” from the company’s CEO filed as an exhibit. Let me know if you spot anything else unusual…

Nuggets from “The Advisors’ Blog”

We continue to post new items daily on our blog – “The Advisors’ Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Internal Pay Disparity: Comments Coming In Ahead of SEC Proposals
– Say-on-Pay Post-Mortems
– An Analysis of Recently Adopted Clawback Provisions
– AFL-CIO’s White Paper: “Why CEO-to-Worker Pay Ratios Matter for Investors”
– Study: Companies Change Peer Groups Often

– Broc Romanek