A few weeks ago, I attended the “spring” meeting of the Council of Institutional Investors in Washington (the quotation marks signifying that it didn’t feel like spring – in fact, it snowed one evening).  These meetings are always interesting, in part because over the 15+ years that I’ve been attending CII meetings, their tone has changed from general hostility towards the issuer community to a more selective approach and a general appreciation of engagement.

So what’s on the mind of our institutional owners?  First, an overriding concern with capital structures that limit or eliminate voting rights of “common” shareholders.  CII’s official position is that such structures should be subject to mandatory sunset provisions; that position strikes me as reasonable (particularly as opposed to seeking their outright ban), but it’s too soon to tell whether it will gain traction.

Continue Reading News from the front

The still relatively new SEC Chair, Jay Clayton, has let it be known that one of his missions is to improve the health of our IPO market and, thereby, to improve our capital markets generally.  His minions – including a senior SEC Staff member I recently heard in Washington – have been spreading this gospel according to Jay.

I wish him (and them) luck, but I wonder if the mission is impossible.  I’m thinking of some recent articles, including one by the inimitable Andrew Ross Sorkin entitled “Fixing the ‘Brain Damage’ Caused by the I.P.O. Process”, that makes the resuscitation of IPOs seem unlikely.  As if the title weren’t off-putting enough, one of the executives quoted in the article described his company’s IPO process as “a way of living in hell without dying”.  Not a good start.

Continue Reading Can the US IPO market be brought back from the dead?

In late July, S&P Dow Jones and FTSE Russell announced that they were changing or proposing to change the standards that govern whether a company is included in their indices.  Although their approaches differ, the changes would effectively bar most companies with differential voting rights from their indices, as follows:

  • In its July 31 announcement, S&P Dow Jones said that companies with multiple share classes will no longer be included in the indices comprising the S&P Composite 1500 – which includes the S&P 500, S&P MidCap 400 and S&P SmallCap 600. There are some exceptions; companies currently in these indices will be grandfathered, as will any newly public company spun off from a company currently included in any of the indices.
  • Five days earlier, FTSE Russell proposed to require more than 5% of a company’s voting rights – across all equity securities, whether or not listed or traded – to be held by “free float” holders to be eligible for inclusion in the FTSE Russell indices.

Continue Reading Class Acts: Stock Indices Bar Differential Voting Rights


I don’t know when Congress decided that every piece of legislation had to have a nifty acronym, but the House Financial Services Committee recently passed (on a partisan basis) what old-fashioned TV ads might have called the new, improved version of the “Financial CHOICE Act”.  The word “choice” is in solid caps because it stands for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs”.

Whether and for whom it creates hope, opportunity or something else entirely may depend upon your perspective, but whatever else can be said of the Act, it is long (though at 589 pages, it is slightly more than half as long as Dodd-Frank), and it addresses a very broad swath of issues.  Here’s what it has to say about some key issues in disclosure, governance and capital formation, along with some commentary. Continue Reading The Financial CHOICE Act – everything you’ve ever wanted, and more?

This posting is a reprint of an article, co-authored by Bob Lamm and David Scileppi, that appeared in the Daily Business Review on July 15, 2016.    

Recent months have been difficult for the initial public offering market. In fact, year-to-date, IPOs are down nearly 60 percent compared to last year. One of the bright spots in this IPO down market has been Sensus Healthcare Inc., a Boca Raton-based medical device company.


We are proud to have worked with Sensus Healthcare on its IPO, which priced on June 2; Sensus is now listed on NASDAQ under the SRTSU symbol.

Though we’ve worked on numerous offerings over the course of our careers, the Sensus transaction reminded us of some key things that companies should consider as they proceed toward an IPO. Continue Reading Top Five Considerations in a Challenging IPO Market

Two news items from the front lines:

First, you may recall my mentioning that the Council of Institutional Investors was considering adopting a new policy that would limit newly public companies’ ability to include “shareholder-unfriendly” provisions in their organizational documents (see “Caveat Issuer“, posted on February 13).  I just came back from Washington, DC, where I attended the Council’s Spring Meeting, and the new policy appears to have been adopted as proposed.  While the text of the new policy was not made available at the meeting, and has yet to be posted on the Council’s website, it appears to provide that while some of these provisions can be in place when a company goes public, others — such as plurality voting for directors in uncontested elections — should be absent from the get-go.

By the way, my hotel room had a lovely view of the Jefferson Memorial, and the cherry blossoms were about to pop.

In other news, the SEC has announced, by way of a Sunshine Act Notice, that at an open meeting to be held on March 30 it “will consider whether to issue a concept release seeking comment on modernizing certain business and financial disclosure requirements in Regulation S-K”.  Looks like the disclosure effectiveness program may be moving forward.  Watch this space for details.


Despite the wave of corporate governance reform that began after the enactment of Sarbanes-Oxley in 2002 – and that continues pretty much unabated today – companies going public have gotten a pass. Whether the process of going public takes the form of a spin-off or a conventional IPO, newly public companies have been able to emerge into the world with a full (or nearly full) arsenal of defensive weapons that can help them stave off an unwanted acquisition.

The rationale for this leniency is that newly public companies are like tadpoles that need to be given time to turn into frogs (or princes) before they are gobbled up.

That seems to be changing.

Continue Reading Caveat issuer

I’ve done my share of griping about the SEC, but credit needs to be given where credit is due. And credit is due to the SEC for adopting a new, improved version of Regulation A that has become known as “Reg A+”. (OK, we can gripe about how long it took the SEC to adopt the final rule, but let’s be gracious and remember that justice delayed isn’t necessarily justice denied.)

Reg A has been around forever, but has been used very infrequently. Like many other long-time SEC practitioners, I’ve never done a Reg A deal. There are many reasons for this, but the big one is that Reg A limited the maximum amount of an offering to $5 million – hardly enough to justify the costs involved (which included compliance with Blue Sky laws). Then Reg D came along, as well as the amendment of Rule 144 reducing the amount of time that an investor had to hold “restricted securities,” and the rest is history.

The JOBS Act called for the SEC to review and update Reg A, and they’ve done an A+ job – all puns intended. Here are some key provisions of Reg A+ Continue Reading A high mark (would you believe an A+?) for the SEC

HR 3623 does not provide relief
The Great Flood of 1927 by Gil Cohen

In recent weeks, a bill has been reported out of the House Committee on Financial Services promising relief to companies going public.  While I applaud their intentions, this bill will not have much impact, and if anything, is a solution to problems that don’t exist.

On March 14, 2014, the House Committee approved 56-0, a bill titled “Improving Access to Capital for Emerging Growth Companies Act (H.R. 3623).  This purported bipartisan “relief” doesn’t actually provide that much real relief to public companies.  This proposed bill has four major goals.  First, it shortens the period of time that an emerging growth company must publicly file its registration statement before commencing its road show from 21 days to 15 days.  Second, if an issuer loses its emerging growth company status during the registration process, it will be allowed to register as if it had remained an emerging growth company.  Third, an emerging growth company will not be required to include in its registration statement certain historical financial information if the registration statement would be required to be updated to include more recent financial information prior to the registration statement going effective.  And fourth, emerging growth companies will be permitted to submit confidentially registration statements for follow on offerings for up to one year after its initial public offering.

Only one of the goals of HR 3623 is arguably helpful.  In the unusual situation where an issuer was just under $1 billion in revenue when submitting its registration statement and then, due to revenue growth, would no longer qualify as an emerging growth company, it can keep the “benefits” of being an emerging growth company.  It would seem unfair for the issuer to have to lose its status mid-stream, but I don’t know how many issuers this would actually help.

All of the other provisions of HR 3623 are not helpful.  First, not having to include financial information that would otherwise not be required in the final version of the prospectus can reduce some burden of going public; however, because most emerging growth companies voluntarily provide three years of financials rather than two (as permitted) to avoid being perceived as not a “real” public company, this provision is rather meaningless.

Second, shortening the time from which an issuer must publicly file its registration statement until it can commence its road show from 21 days to 15 days will likely be, in practice, meaningless, and potentially dangerous to investors.  There is real value in having the financial press and the public review the public filings of a company going public.  The more people who review the filings, the greater the likelihood that problems with the issuer’s business model or financial statements are discovered.  Most reputable investment banks will likely continue to wait at least three weeks prior to commencing the road show for this reason.

Third, I see very little value in providing an emerging growth company the ability to submit confidentially registration statements for follow on offerings.  The entire value of submitting confidentially is that an issuer can decide not to register its securities before it makes its information publicly available.  In a follow on offering, the issuer will already have made its information public through its initial registration statement and its subsequent periodic reports.

My recommendation is that if Congress truly wants to increase the number of public companies then it should reduce the disclosure obligations of public companies by extending permanently (rather than the current five year maximum benefit) the streamlined disclosure for emerging growth companies (and having it apply to all issuers) and make it more difficult for plaintiffs to recover damages from public companies in securities litigation.  The disclosure burden and litigation risk are contributing much more to the cause of companies not going public than what this bill is attempting to address.