NVCA throws weight behind IPO bill

The National Venture Capital Association is pushing for the US Senate to pass legislation helping private companies pursue initial public offerings.

The proposed legislation is envisioned as a five-year grace period allowing businesses with annual revenue of less than $1 billion a relaxed set of standards to follow before meeting full listing requirements. If passed into law, the new legislation would help businesses “more effectively communicate with investors before, during and after the [public] offering, creating additional safe harbors for additional analyst research coverage and allowing an expanded range of pre-filing communications”, according to a NVCA statement.

The NVCA on Monday delivered a letter with more than 700 signatures from US business owners encouraging the US Senate to approve legislation identical to “The Reopening American Capital Markets to Emerging Growth Companies Act of 2011”, which the US House of Representatives passed on 8 March. Last week, the NVCA expressed its support for the passage of the House bill, which it said would help businesses pursuing an IPO by offering “temporary relief from onerous and costly provisions”.

“During the past decade, emerging growth companies have faced numerous new challenges when considering an IPO,” according to the letter. “The regulatory on-ramp provisions thoughtfully address many of these issues and, for the first time in years, will provide much needed support for small companies with big potential.”

The provisions are part of the US government’s Jumpstart our Business Startups (JOBS) Act.

“The bipartisan support for this bill evidences the positive impact it will have on young companies that seek significant growth through the US capital markets system,” president of the Mark Heesen said in a separate statement.

The NVCA was not available for comment at press time.

The new legislation was originally proposed in October 2011 when an IPO task force assembled by the US Treasury recommended relaxing listing requirements for small companies as a way of reenergising a subdued IPO market.  The task force is comprised entirely of private sector professionals, including chief executives, venture capitalists and lawyers.

Kate Mitchell, managing director of Scale Venture Partners and chair of the IPO Task Force said in the statement the bill would have a positive impact in capital markets, “where IPO volume continues to fall short of healthy levels.”
 
If enacted, the legislation would today impact an estimated 14 percent of companies and 3 percent of total market capitalisation in the US, according to a report from the IPO task force.