“Gross profit may be more appropriate than revenue because it somewhat neutralizes the impact of the company’s industry and better reflects the company’s ability to pay its ‘below the line’ compliance costs from a financial statements perspective.” “Instead, a test based on revenue or gross profit, either in addition to, or in lieu of, public float is better suited to determine whether a company can qualify for the ability to provide scaled disclosure,” Uyeda explained. It does not measure a company’s ability or resources to pay their attorneys, accountants, consultants and internal staff to prepare Form 10-Ks, proxy statements and other regulatory filings with the SEC. In discussing the 2020 rule, Uyeda said that a public float only measures the value of the public’s investment in a company. “Unsurprisingly, smaller companies with less revenue and less gross profit have fewer resources to pay for the increasing compliance costs of being a public company,” Uyeda said at the conference in New York. Between 2001 to 2021, there were only 2,276 IPOs, Uyeda said.Īt the same time, private markets, where companies comply with a simpler set of rules, have been booming. Since 2001, that percentage has gone down to 55 percent.Īs for the public market overall, there were 4,194 IPOs between 19. Between 19, the percentage of IPOs of a company that had less than $1 million in revenue in the trailing 12 months was 72 percent. The percentage of listed companies with less than $100 million in revenue decreased by about 60 percent from 1998 to 2017. While he does not claim that burdensome regulation is the sole culprit behind the decline, Uyeda believes that it is a major factor. But this decline has been more pronounced among smaller companies. A company with no public float or with a public float of less than $700 million also qualifies as an SRC if it had annual revenues of less than $100 million during its most recently completed fiscal year.Ĭommissioner Uyeda’s March 3, 2023, speech during a Columbia Law School/Business School Program comes as there has been a decline in the number of public companies and initial public offerings (IPOs) over the years. SRCs have less than $250 million in public float. The rule exempted SRCs from Section 404(b). In particular, the amendments were in response to complaints by biotech companies and the U.S. The 2020 rules, adopted when Jay Clayton ran the agency, were intended to benefit low revenue companies even if the funds raised in the public stock markets are not small by changing the definition of accelerated and larger accelerated filer definition. Previously, only companies with less than $75 million-or non-accelerated filers-in public float got the regulatory relief. When the SEC changed the rules three years ago to exempt more categories of companies from Section 404(b), it was a big victory for businesses as they claimed that the provision was one of the biggest hurdles for companies going or staying public. SRCs still need to comply with Section 404(a), which requires management to maintain ICFR and evaluate its effectiveness. While he did not spell out the regulatory benefits of being an SRC in his speech, this class of companies do not need to get their independent auditor’s attestation of the management’s internal control over financial reporting (ICFR) under Section 404(b) of the Sarbanes-Oxley Act of 2002. SEC Commissioner Mark Uyeda in a speech suggested reducing rule compliance burdens, among other measures, to help smaller companies go and stay public.įor example, he said that the commission could consider ways to get more companies to qualify as “smaller reporting companies” (SRCs).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |