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Small Business Bill Gets Past The House

Going public through the initial public offering of stock, an IPO, is seen by many as a good thing, not only for the company doing it, but for the general economy. Offerings, if done well, can raise large amounts of cash for a company, which can be used to pay off debt or grow the company, and a company can sell additional stock later to raise more capital. A successful IPO, and the cash it can bring in, can also increase the value of a company in the eyes of those interested in possibly purchasing it. In addition, by helping a company grow, an IPO can encourage the hiring of more employees, a benefit to the economy.

So going public, if a company is ready for it, can be a very positive step. One would think that the number of IPOs would grow right along with the number of companies out there. But such is not the case. Initial public offerings have become less frequent since the mid-1990s. One of the reasons seems to be the increasing amount of time, money, and paperwork now required to put together a successful IPO. The legal and accounting complexities of SEC registration, and associated requirements, represent an up-front burden that fewer and fewer small companies can afford to make. And since small business is seen as the ultimate source of American job growth, it's considered a serious problem.

But help may be on the way. On Thursday, the U.S. House of Representatives passed a small-cap IPO bill aimed at making it a bit easier for small companies to go the public money route. Backed by the White House, the bill basically lets smaller companies ease into the public offering process gradually, rather than requiring an immediate all-or-nothing entry investment. Moreover, it allows certain limited channels of access to public funding without SEC registration. There are several different parts to the bill, some directed at the IPO process and some allowing small companies to get private investor money from the public without registering with the SEC.

Although receiving large bi-partisan support, the bill had a few detractors who expressed concern that easing registration and disclosure requirements could open the door to increased investor risk at a time when more visibility is needed, not less. The next step is the Senate, where work is already under way on a similar bill.

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