That’s especially true for small start ups that lack the cash to hire the myriad legal and accounting expertise that ready disclosures that investors and regulators demand.
Market challenges have not necessarily curbed owners pursuit of capital or investors demand for IPOs, especially in certain industries. Proceeds from IPOs in five of the 11 S&P 500 sectors have more than doubled since last year, according to S&P Capital IQ. The healthcare sector was most active with 21 offerings, followed by the energy sector with nine IPOs completed in the U.S. this year.
For those financial executives at the center of the IPO storm it’s proper planning, along with leveraging the correct resources and technology, that can help avoid the most common IPO headaches and actually differentiate a company from competitors, according to new research issued today from the Financial Executives Research Foundation and Donnelley Financial Solutions.
The report, titled “Growing Past Emerging Growth: Five Years after the JOBS Act,” focuses on IPO hopefuls that have taken advantage of the the Jumpstart Our Business Startups (JOBS) Act of 2012. The JOBS Act sought to encourage startups to enter the public markets by creating Emerging Growth Companies (EGC) that were exempt from certain regulatory burdens, including allowing “scaled” disclosure requirements.
The FERF report details the milestones that trigger a transition to full reporting and disclosure requirements and the opportunities for EGCs to establish best practices in financial communications and shareholder relations.
EGCs have remained a popular tool for companies in the same sectors that are most active today. Nearly 78% of IPO issuers in 2016 were EGCs, with a high concentration of EGC IPOs in healthcare, telecommunications, energy and power, according to a study released by the U.S. Securities and Exchange Commission’s Division of Economic and Risk Analysis.
“Despite the expansion of Sarbanes Oxley and other requirements, technology can reduce the time to prepare financial statements, enhance the quality of disclosures and help better communicate the value of a company to its investors,” said Craig Clay, President, Global Capital Markets at Donnelly Financial Solutions.