Congressional consideration of further deregulation of the federal securities laws, informally labeled by some as JOBS II, makes an evaluation of the impact of the JOBS Act of 2012 particularly timely. Several of the provisions of the JOBS Act relax the level of mandatory disclosures required of “emerging growth companies” (EGCs) during the IPO process and phase in certain ongoing regulatory requirements following the completion of an IPO. In a recent article, Going Public After the JOBS Act, I gather data on IPOs during the period 2010-2013 and perform an empirical assessment of the impact the JOBS Act has had on EGCs’ access to the public capital markets.
The evidence indicates that EGCs are not only taking advantage of the scaled disclosure requirements made available to them under the JOBS Act, but are also doing so with increasing frequency. For example, during the time period I studied, 87.3% of EGCs elected to file a confidential draft Form S-1 with the SEC. But in the first three quarters following the enactment of the JOBS Act, the percentage of issuers filing a confidential draft was about 72.7%, which is substantially lower than the percentage of issuers who chose to do so during the later quarters in the sample, 90.6%. There was also a considerable increase in the proportion of issuers that elected to include two rather than the standard three years of audited financial statements – from 27.3% in the first three quarters to 44.8% in the last three quarters (the overall sample average is 41.5%). Notably, EGCs that took advantage of the scaled financial disclosure available under the JOBS Act had lower revenues, were younger, and disproportionally belonged to R&D-intensive industries, such as pharmaceuticals. It is worth noting that these figures exclude IPOs in which the initial Form S-1 was publicly filed with the SEC before the JOBS Act became effective, as including these IPOs would merely inflate the reported inter-temporal differences. Read the complete post.