A Roadmap for Growth: Reforms to Encourage Capital Formation and Investment... (EventID=115754)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinanci... Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Wednesday, April 19, 2023, at 2:00 p.m. (ET) Subcommittee on Capital Markets Chair Wagner and Ranking Member Sherman will host a hearing entitled, “A Roadmap for Growth: Reforms to Encourage Capital Formation and Investment Opportunities for All Americans." ___________________________________ Witnesses for this one-panel hearing will be: • Joel H. Trotter, Partner, Latham & Watkins LLP • Rodney Sampson, Executive Chairman & CEO, Opportunity Hub • Henry Ward, Co-Founder & CEO, Carta • Brandon Brooks, Founding Partner, Overlooked Ventures • Melanie Senter Lubin, Maryland Securities Commissioner, on behalf of NASAA ___________________________________ The JOBS Act Created New Opportunities to Access Capital Through the Public and Private Markets Companies have two ways of accessing capital in the securities markets to fund their operations: an initial public offering (IPO) where they sell securities publicly through a registered offering with the SEC; or a private offering under an exemption from registration. Accessing capital through an IPO is a significant step for a company because there are considerable upfront costs as well as increased costs associated with the company’s ongoing reporting requirements as a public company. Before an IPO, companies incur significant costs to gather and compile mandatory information to submit to the SEC and make available to the public for the sale of its securities. After an IPO, companies must continue to comply with SEC regulatory requirements, such as audit and disclosure requirements intended to provide shareholders and potential investors information necessary to make informed investment and voting decisions. However, many companies are not ready to pursue an IPO or want to avoid the costs associated with being publicly traded, particularly smaller companies. Therefore, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) reduced regulatory barriers and created new opportunities for emerging companies to access capital through our public markets and for small businesses and entrepreneurs to raise funds in private markets. Importance of Entering the Public Markets In a challenging global economy, the strength of our capital markets is vital to long-term economic growth. However, rising costs and increased regulatory burdens prevent small businesses from entering our public markets, depriving everyday investors of opportunities to invest in high growth companies and hindering the United States’ ability to compete globally. The number of new businesses entering public markets through an initial registration of publicly traded securities (or IPO) with the Securities and Exchange Commission (SEC) has declined, except for a surge in 2021 driven by an increase in the number of IPOs by special purpose acquisition companies (SPACs). The U.S. has recorded several of its worst years on record for IPOs, while costs businesses incur to go public have doubled since the 1990s. According to some reports, “Investment bankers, lawyers, and auditors collectively charge millions of dollars to prepare the lengthy registration statement that must be filed with the SEC before shares can be sold.” While IPOs in U.S. markets approach their lowest point on record, the number of annual IPOs in Mainland China continues to increase.5 In 2022, Mainland China accounted for 39 percent of all global IPO activity. The launch of the Beijing Stock Exchange in 2021 and tighter regulatory restrictions on Chinese issuers on U.S. exchanges have contributed to this growth. Additionally, Beijing’s “Made in China 2025” agenda lays out its plan to dominate the high-tech, biotech, and artificial intelligence industries within the next ten years. This increased pressure from foreign markets, especially Mainland China, only heightens the necessity for immediate action and reform. Notably, the JOBS Act included several provisions specifically designed to strengthen public markets. For example, to encourage more small-cap IPOs, Title I created a new “Emerging Growth Company” (EGC) designation and an IPO “on ramp” for companies to gradually begin complying with public company regulatory requirements. Additionally, Title V raises the thresholds for mandatory registration as a public company to prevent private companies from being forced to go public before they are ready. Congress should build on the success of these provisions by introducing smart, incremental reforms that encourage companies to go public. With more companies entering our public markets, everyday investors will have greater access to investment... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=410298