by Phillip J. Kardis II, Robert K. Smith, and Barry Spatzer
Just as HOV lanes were created
to ease the commuting burden for those who meet certain requirements, the
recently enacted Jumpstart Our Business Startups ("JOBS") Act created
the "IPO On-Ramp" to ease the burden of becoming and being a public
company. To hop on the ramp, all you have to do is meet certain requirements,
and unlike HOV lane limitations, the requirements are not very restrictive. You
just need to be an "Emerging Growth Company."
In this EIA, we explore what it means to be an "Emerging Growth
Company"; the benefits of the "IPO On-Ramp"; and the benefits
from the JOBS Act once you become a public company. The JOBS Act, however, does
more than just create the "IPO On-Ramp" - it restructures much of the
landscape for raising private capital as well. If you would like to learn more
about the JOBS Act see the EIA on Capital Raising Alternatives.
What is an "Emerging Growth Company"? Sounds like High-Tech, but
An emerging growth company ("EGC") can be a high-tech company, a
consulting company, a finance company (including consumer finance), or a real
estate investment trust ("REIT"). An emerging growth company is not
defined by its industry, its growth rate, or its prospects, but simply based on
the size of its revenues. If your revenues for your most recently completed
fiscal year are less than $1 billion, you are an EGC: simple as that. And you
remain an EGC (with full benefits) until the earliest of (i) the end of the
fiscal year in which your revenues equal or exceed $1 billion; (ii) the end of
the fiscal year following the fifth anniversary of your IPO; (iii) the date on
which you have issued more than $1 billion in non-convertible debt over the
prior three-year period; and (iv) the date on which you become a "large
accelerated filer" under the Exchange Act (which means, among other
things, your public float is at least $700 million). [footnote omitted]
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This Emerging Issues Analysis was authored by attorneys at K&L Gates LLP. .
Phillip J. Kardis II is
a partner at K&L Gates. Mr. Kardis has a broad range of experience
in assisting clients with complex corporate, securities and financing
transactions, especially transactions involving mortgage REITS and
financial assets (such mortgage loans, servicing rights, auto loans, and
SBA Loans), including public offerings (debt and equity), private
placements, private equity, asset-back secured lending, joint ventures
and other investment vehicles, mergers and acquisitions, asset-backed
securitizations, going private transactions, REIT conversions, and debt
offerings. He has represented several Wall Street investment banks,
mortgage and specialty auto finance companies, REITs, broker-dealers and
a variety of technology companies. Mr. Kardis also advises companies on
compliance with Regulation AB and is a frequent speaker on Regulation
Robert K. Smith is of
counsel in the firm's Washington, D.C. office. He focuses his practice
on corporate and securities matters, including a broad range of capital
markets activities (including representing both issuers and underwriters
in securities offerings, including IPOs), securities regulatory and
compliance advice, corporate governance matters, restatements, merger
and acquisition transactions and general corporate matters.
Barry Spatzer focuses his practice on securities offerings, mergers and acquisitions, and other general corporate matters.
This Emerging Issues Analysis is for informational purposes and does
not contain or convey legal advice. 2012 K&L Gates LLP, All Rights