New Year’s Wishes for Smallcap World for 2013 1

For now the 6th year in a row I’m happy to throw out my wish list for the small and microcap world and those into alternatives to a traditional IPO to go public. As always I want to give special thanks to my faithful blogees especially in this, a challenging year for many of us. The good news: the last quarter has picked up for sure, deals are closing, reverse mergers are picking up, and we are getting financings done for small public companies more than in quite awhile. So here are my top 10 wishes for our world, as always too many seem to repeat from year to year, but we keep our various digits crossed…

1. I continue to wish that the SEC will finally remove the unduly burdensome Rule 144(i) restrictions on resale of unregistered shares of former shell companies if the company is not current in its SEC filings. Respectfully, socking former shells with this overreaching draconian restriction forever is simply unfair.

2. I wish that the SEC will reverse the extremely ill-advised “seasoning requirements” limiting a post-reverse merger company’s ability to uplist to a major exchange before trading over-the-counter for one full fiscal year. In my view the problem it sought to address is nowhere near as serious or documented as believed, and the apparent solution does virtually nothing to even address the alleged problem. If not reverse it, provide an exemption from seasoning for an underwritten public offering of $15 million.

3. I hope the SEC, under new Chair Walter, will with deliberate speed complete the various rulemakings required of it by the Jumpstart our Business Startups (JOBS) Act. We are especially looking forward to the rules relating to Regulation A and the elimination of the ban on general solicitation under Regulation D Rule 506 offerings. They both have the potential to dramatically change how companies raise money and go public.

4. I wish that the SEC will begin to look at modernizing the 20-year old Rule 419 which severely restricted public offerings by shell companies. If you limit the public offering to accredited investors, they should be able to be treated the same as if you created a shell with Form 10 and a reverse merger should be able to be completed without a time-consuming and burdensome SEC proxy filing. This would hopefully help bring an end to the fraudulent practice of taking a “real” company public then marketing it as a shell without disclosing this to the public.

5. I continue to wish that the SEC would eliminate Schedule 14f-1, an SEC filing by a shell that must be completed 10 days before closing a reverse merger in many cases. Or at least I wish they would eliminate it in situations where the stock of the public company is not trading, or where the sole stockholder is also the sole director and officer approving the transaction. This would be a big help in transactions. Frankly the filing and mailing serves no real purpose that I can discern in these situations.

6. I wish the SEC would reconsider prohibiting smaller reporting companies (market capitalization under $75 million) from using short form registration on Form S-3 like larger companies. This has severely hampered fundraising efforts by companies that are otherwise fully compliant with their filing obligations. The SEC actually proposed this in 2007 but changed its mind in its final rulemaking on the subject despite the lack of any negative comments to their proposal.

7. I wish that more companies discover the benefits of a “self-filing” which avoids the issues, many imposed by the regulators, that one faces when merging with a reporting shell company. The self-filing is cleaner but does take a bit more time.

8. I wish that the SEC moves quickly to develop rules for crowdfunding under the JOBS Act. While the bill did not go as far as originally drafted and as the House originally desired, it represents a good first step in what could become a new wave of small financings for start-ups and early stage companies.

9. I continue to wish the SEC would consider exempting smaller reporting companies from the “detailed tagging” in XBRL that started this year. Since XBRL is for the benefit of stock analysts, and very few such companies are covered by analysts, the extra cost, hassle and delay serves very little, if any, benefit.

10. I wish the SEC’s new leadership under Elisse Walter and new heads of Corporation Finance and other divisions the very best of luck in developing and implementing their various agendas. Hopefully, working with the Advisory Committee on Small and Emerging Companies, both can happen expeditiously so that no time is wasted in looking at ways to improve opportunities for capital formation for smaller companies.

Happy New Year to all my amazing blogees throughout the world! Keep an eye out for my new book next year on entrepreneurship…..

One comment on “New Year’s Wishes for Smallcap World for 2013

  1. Reply Brian A. Lebrecht Dec 27, 2012 10:23 am

    Here, here. A comprehensive list of the issues currently faced by micro cap companies. Thanks, David.

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