|San Jose Business Journal - Startups could avoid costly reporting with 'mini' IPO legislation|
Rep. Eshoo recently spoke with Diana Samuels, staff writer for the San Jose Business Journal, about her bipartisan legislation, the Small Company Capital Formation Act, which would increase the offering limit from $5 million to $50 million under SEC Regulation A, which was enacted during the Great Depression to facilitate the flow of capital to small businesses. Eshoo has fought for this legislation because in tough economic times, it's critical for Congress to facilitate capital formation and bolster American innovation. An excerpt of the article is below:
A little-used avenue for companies to raise cash could become much more useful under legislation making its way through Washington, D.C.
The House of Representatives voted on Nov. 2 to increase the limit on the amount of money that can be raised through "mini public offerings," which are smaller offerings that don't require companies to go through the same exhaustive and expensive Securities and Exchange Commission registration process as a full initial public offering. Previously, companies could only raise $5 million annually through this process, but the House proposes to raise that cap to $50 million.
Politicians and people in the local investment community say if the change is approved by the Senate and ultimately becomes law, it will give companies one more potential option to raise capital. The mini offerings are intended to give companies a way to easily raise cash, or test the waters before going for a full IPO.
The mini offerings are allowed under the SEC's "Regulation A," which was established along with the rest of the Securities Act of 1933, the first legislation that regulated the stock market. Regulation A has been capped at $5 million since 1992, but raising the limit to $50 million will bring the rule "into the 21st century," said Rep. Anna Eshoo, a Palo Alto Democrat who co-sponsored the House bill to raise the cap.
The House passed the bill, the "Small Company Capital Formation Act," by a vote of 421-1. The Senate still must approve the legislation, or the SEC and President Barack Obama could change the rule administratively.
Because the $5 million cap was so low, Eshoo said, the rule had been largely unused in recent years. According to Eshoo's office, only 25 companies filed with the SEC for Regulation A in the fiscal year ended Sept. 30, 2010, and only seven of those were deemed qualified.
"Here was something that was on the books, that had gathered some dust, and we moved on it," Eshoo said.
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|Thomas Bill Search|