TheCorporateCounsel.net

A few weeks ago, I had the honor of participating as a panelist at the SEC’s 44th Annual Small Business Forum, which took place at the SEC’s Washington, DC headquarters. The SEC has posted recordings of the first half and the second half of the program, and my panel took place during the second half. The panel was moderated by Sebastian Gomez Abero, who is Acting Deputy Director, Legal and Regulatory Policy in Corp Fin, and I was joined on the panel by Dr. Yunhao Chen, who serves as CFO of Massimo Group.

We focused our panel discussion on going public and operating as a public company, addressing some of the key challenges that smaller companies face when seeking to access the public capital markets, as well as once they are operating as public company. During the course of our conversation, I shared the following observations:

– While we observed increased IPO volume in 2024 and the first quarter of 2025, the IPO market largely shut down amidst the market turmoil that followed the U.S. government’s shift in trade policy, which demonstrates how quickly the market dynamic can change, and how companies that are seeking to go public have very little control over their IPO timeline given how the IPO window can so rapidly close.

– One of the biggest challenges for smaller companies seeking to go public is a problem that cannot be readily addressed through regulatory policy or legislative action, and that is the lack of infrastructure for completing small IPOs, as we have lost the regional investment banks and regional stock exchanges that existed 30 years ago.

– I noted that this challenge leads us to the need to rethink what is an IPO, because the traditional underwritten, fully-marketed IPO that is trading on a stock exchange is very much reserved for companies that have valuations that can support raising a hundred and fifty million, two hundred million dollars in proceeds, and that is why there was excitement with things like Tier 2 of Regulation A and the JOBS Act IPO on-ramp.

– For smaller companies that have gone public, one of their biggest challenges as a public company is the complexity of the disclosure requirements on top of the general compliance costs and the need for controls and all those things that come with operating as a public company. In this regard, I pointed out the complexity of navigating the SEC’s filer status rules.

– I also noted the volume of the disclosure required of smaller companies, and how the gap has narrowed between what a smaller company must disclose and what a larger company must disclose. I offered up that perhaps we should go back to having a completely separate disclosure regime for smaller companies, as we did in the times before Regulation SB was integrated into Regulation S-K.

– For any companies still thinking about going public when facing all of these challenges, I offered that you should act like a public company before you become a public company, because for the executive team, the financial reporting team, the lawyers and everyone else that might be involved, you really have to build that muscle of being a public company over time. This involves focusing on your compliance program, focusing on your internal controls and disclosure controls, a really thinking about how you will interact with investors and how you will communicate the company’s story.

– In terms of suggestions for regulatory changes, I offered that we should really step back and figure out what do we really mean when we are trying to categorize smaller companies, particularly for the purpose of effectively right-sizing their disclosure obligations to align with their size and sophistication. I also noted that we should enhance and expand the improvements that came about with the JOBS Act, while revisiting shelf eligibility for companies that are already public.

The SEC’s Small Business Forum was a very thought-provoking program at a time when we are experiencing some legislative and regulatory focus on capital formation for smaller companies. I encourage you to go back and listen to the archive or review the transcript if you were not able to watch it live.

– Dave Lynn