Submitted by Rick Schweiger, Keating Investments, LLC
Now that President Obama has signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), publicly reporting companies with a public float below $75 million are permanently exempt from the auditor attestation requirements under Section 404(b) of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). Under the Section 404(a) of the Sarbanes-Oxley Act, all public companies are required to assess the effectiveness of their internal control over financial reporting, while Section 404(b) required the company’s independent auditors to report on management’s assessment.
Since enactment, the provisions of Section 404(b) have been the source of much controversy, especially the anticipated compliance burdens on smaller reporting companies. This led the SEC to delay the compliance date for Section 404(b) for smaller reporting companies several times. While smaller reporting companies are still required to disclose management’s assessment of its internal control over financial reporting, the permanent exemption from the auditor attestation requirement is a significant victory for small public companies and for the future prospects of small business capital formation in the U.S. And as an interesting aside, the Act also requires the SEC to study ways to reduce the burdens of compliance with Section 404(b) on companies with $75 million to $250 million in market capitalization. Let’s hope this is only the beginning of much-needed small business regulatory reform.
The opinions set forth in the foregoing article do not necessarily represent the opinions of Keating Capital, Inc. or Keating Investments, LLC.
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Opinion by Timothy J. Keating
Previously in this column, we had noted that in 2001 there was an average of 306 market makers quoting prices in stocks trading on the FINRA operated Over-the-Counter Bulletin Board (OTCBB). That number had dwindled to 199 at the end of 2008 and 160 at the end of 2009. As of April, the number stood at 135. There are now some 51,127 priced market maker quotes on Pink Quote vs. 9,615 on the OTCBB.
The OTCBB is now terminally ill; the faster that FINRA pulls the plug the better.
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Opinion by Timothy J. Keating
“Toto, I’ve a feeling we’re not in Kansas any more. We must be over the rainbow!”
If the Tech Bubble of 1999-2000 was the Kansas of the IPO market, then no, Toto, we’re definitely not in Kansas any more. But is where we are today really all that is on the other side of the rainbow? No, and here are a number of important silver linings that provide hope for a more robust and vibrant IPO market—particularly for small issuers.
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Opinion by Timothy J. Keating
We have written in the past about the many factors that have conspired to compromise the traditional, underwritten IPO, particularly for smaller issuers that raise less than $50 million in a public offering. The causes of the extinction of the small IPO include: Sarbanes-Oxley, Regulation FD and the Spitzer “global settlement” on equity research. But it’s not only the primary market that has been affected. Although less headline grabbing, the knock-on effects of these ill-conceived “reforms” have also had insidious impacts on the pillars of the aftermarket, namely research and trading.
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By Timothy J. Keating
For many years, the Ivy League has been known for its traditions, its gothic buildings, and, until recently, the mystique of its mammoth-sized endowments that consistently generated incredibly high returns in bull and bear markets alike. Ivy League and other large endowments, weighing in at billions of dollars, were able to achieve these extraordinary results by following what is often called the “Yale Model” for endowments developed by Yale University’s Chief Investment Officer, David Swensen, under which they invested heavily in alternatives such as private equity and hedge funds. Until very recently, it seemed to some that the Yale Model was invincible.
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Opinion by Timothy J. Keating
The National Venture Capital Association recently published a 4-pillar plan to restore liquidity to the U.S. venture capital industry. The four pillars in the plan are: Ecosystem Partners, Enhanced Liquidity Paths, Tax Incentives and Regulation.
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By Timothy J. Keating
Shortly after the Sarbanes-Oxley Act of 2002 was implemented, it suddenly became very unfashionable to be public—particularly for smaller companies. Out went the emerging growth underwriters of the 1990s (Montgomery, Robertson Stephens, Hambrecht & Quist, to name a few), and in came the leveraged buyout artists to take companies to the promised land of being private…before going public again. So now that enough time has passed, how has it all worked out? That depends. If you were a private company or a limited partner in a private equity fund, the track record has been mixed, at best. If, however, you were a private equity sponsor, chances are that in the era of cheap money that recently ended (and by charging fees for every activity imaginable) you probably did pretty well.
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Opinion by Timothy J. Keating
In his opening remarks to the 2007 Government-Business Forum on Small Business Capital Formation, former SEC Chairman Christopher Cox acknowledged the critical importance of small business to the U.S. economy:
- “Small firms represent…99.7% of all the employer firms in the United States.They employ half of the entire labor force in the private sector.”
- “Of all the net new jobs created in our country, small business generated between 60 percent and 80 percent in every year during the last decade.”
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Alternative Public Market Strategies for High Growth Companies
Submitted by Margie L. Blackwell, Keating Investments, LLC
Recently, Faegre & Benson LLP, one of the 100 largest law firms headquartered in the U.S., and Baker Tilly Virchow Krause, a full-service accounting and advisory firm, sponsored an informative seminar and panel discussion regarding alternative going public strategies. Faegre speakers included Michael Coddington, Jason Day, David Miller, Donald Stewart and Jonathan Zimmerman. Also included in the panel discussion was Rick Schweiger, Chief Operating Officer at Keating Investments; Octavio Cabral, Partner at Collins Barrow; Janis Koyanagi, Director of Business Development at the Toronto Stock Exchange; Rick Hartfiel, Head of Investment Banking at Craig-Hallum Capital Group; and Mike McKee, Partner at Baker Tilly.
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