April 26, 2012
JOBS Act Forum: Surely It's All About The On-Ramp
Posted by David Zaring
The posts so far in the forum have been superb, and allowed me to update my priors on the JOBS Act, which were:
- Changing the number of shareholders required before going public - the forum has convinced me that this looks like it was done randomly, but I understand the impetus. Why should Facebook have to tie itself in knots to avoid going public if it doesn't want to?
- Crowdfunding - I commend Andrew Verstein's paper on this to interested parties, but it all seems like small, if trendy, beer. It's hard to imagine a start-up that gets any escape velocity at all continuing to rely on Kickstarter. I can see crowdfunding working for Instagram, but not for a business that actually needs capital, like, say, an auto-dealer.
- On-ramp - I thought before, and I doubly think now, that this is the very big deal, the total deregulatory tool that will affect many firms and investors. I'm glad Congress provided the opt-out, and nothing in this life is perfect, but it seems to me that we should either believe in our system of securities regulation or we should not. Creating quite a large band of firms that can go public without complying with a big chunk of the securities regs is a strange way to have it both ways. Perhaps Congress views this as a way to test whether the capital markets should be deregulated for all filers. Perhaps Sarbanes Oxley section 404 was a dramatic overreach that has led to a counterreformation that will, in the end, leave us with a lower level of supervision than existed before Enron. But currently, this seems like a strange experiment, rather than a well-thought-out way to ease big firms into the regulatory environment.
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