January 11, 2022

Reining In the Unicorns: Here We Go Again

This recent Wall Street Journal article describes the efforts that the SEC is currently considering as a means to address the persistent “unicorn” phenomenon – private companies worth $1 billion or more. Unicorn’s have been vexing lawmakers and policymakers for decades now, as the availability of plentiful private capital, ever-increasing regulatory burdens and a persistent securities litigation threat have resulted in large companies not going public and subjecting themselves to SEC regulation, public scrutiny and plaintiffs’ lawyers. An inkling of the SEC’s plans recently emerged in the Reg Flex agenda, and now more details are emerging.

It appears that the SEC may reconsider the mandatory registration provisions of the Securities Exchange Act as a means of drawing the unicorns into the SEC’s public reporting system. The Section 12(g) thresholds that trigger mandatory registration were of course raised by the JOBS Act of 2012, but it now appears that the SEC may revisit those thresholds and/or the manner in which investors are counted for the purposes of those thresholds. In their statement following the release of the most recent Reg Flex agenda, Commissioners Peirce and Roisman noted that “[l]owering these thresholds may both contradict the express will of Congress and potentially undermine our mission to facilitate capital formation.”

– Dave Lynn