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1 [1] (March 26, 2018)

handle is hein.crs/govzgx0001 and id is 1 raw text is: Capital Access: IPO and IPO On-Ramp March 26, 2018 Raising capital through public offerings was traditionally viewed as a significant step for companies to achieve growth and create jobs. Its importance, however, has deteriorated over the last two decades, as measured by the decline in the number of initial public offerings (IPOs). In response to this market trend, Congress established a number of new capital access options in 2012 through the Jumpstart Our Business Startups Act (JOBS Act; P.L. 112- 106), including the creation of a new issuer type-emerging growth company (EGC)-to scale down compliance requirements and facilitate IPOs. Because of the rapid adoption of the EGC status by companies going public, some in Congress have proposed widening its access by expanding the length of time an EGC could maintain its status or by extending certain EGC benefits to other IPOs. This has been a source of policy debate. Public Offer ngs and the IPO Process A public offering refers to when a company raises funds from the public at large rather than a narrower group of sophisticated investors. Public offerings consist of IPOs, the first time a company offers its shares of stock to the general public in exchange for cash, and subsequent public offerings. A company can access funding from other sources of capital, such as bank loans or private equity firms, but it may choose to conduct public offerings- which require rigorous Securities and Exchange Commission (SEC) disclosure-for multiple reasons, including fueling the company's future growth; allowing the founders to cash out their investments; providing stock incentives to employees; and enhancing corporate brand awareness. The IPO process, which is a focal point of the policy debate surrounding public offerings, is commonly regarded as the turning point for companies going public. The IPO process generally consists of three phases. Pre-filing Period. As part of an IPO, a company must file a registration statement and other documents that contain information about the company and the funds it is attempting to raise. During the pre-filing period, the public filings are prepared and the planning begins with a thorough review of the company's operations, procedures, financials, and management, as well as its competitive positioning and business strategy. The disclosure documents serve the dual purpose of satisfying SEC registration requirements and communicating with investors. Waiting Period. Once the key disclosures are filed, the company waits for the SEC to review and provide approval. During the waiting period, the company concurrently addresses SEC comments and prepares roadshow presentations as well as other legal documents needed to consummate the sale. Roadshows are presentations made by an issuer's senior management to market the upcoming securities offering to prospective investors. Roadshows can commence only after the filing of registration statements. Post-effective Period. The actual sales to investors take place after the SEC declares that the IPO registration is effective. The post-effective period extends from the effective date of the registration statements to the completion of distribution of the securities. With the completion of the IPO, the securities generally continue to trade on a stock exchange. Market Trends Going public was traditionally viewed as a significant funding source for growing companies. More recently, however, the number of U.S.-listed domestic public companies has declined by half over the last two decades (Figure 1) while listings are estimated to have risen by half in other developed countries over the same time period. Overall, the number of public companies declined due to mergers, acquisitions, and delistings (removal of securities from exchanges). In addition, part of the decrease in the number of public companies is due to the decrease in IPOs. According to data provider Dealogic, U.S. IPOs raised $49.3 billion through 189 offerings in 2017, more than double 2016's level of $24.2 billion raised through 111 offerings. Though the total number of IPOs increased in 2017, it has remained far below the IPO average of more than 500 per year in the 1990s. However, whether the 1990s, which experienced the dot-com bubble, is an appropriate benchmark is a point of contention as well. Figure I. Number of U.S.-Listed Public Companies and Aggregate Market Capitalization 1975 1978 1981 1984 1987 1990 1998 1996 199 2002 2005, 2008R 2011 2014 Sources: Center for Research in Security Prices; and Kathleen M. Kahle and Ren6 M. Stulz, Is the U.S. Public Corporation in Trouble? Journal of Economic Perspectives, vol. 3 1, no. 3, pp. 67-88. I PO On-Ramp-Emerging Growth Companies In response to declining IPOs over the last two decades and in an effort to reduce barriers for smaller companies accessing public offerings, Title I of the JOBS Act established streamlined compliance options for companies that meet the definition of a new type of issuer, called an hftpsi/crsreports.con, -- -q