US regulators moved to try to boost the flagging number of stock market listings on Thursday, telling large companies that they will be able to keep their financial information secret while they prepare for a public offering.
Jay Clayton, the corporate lawyer appointed as SEC chairman by President Donald Trump earlier this year, said the aim was that “the next American success story will look to our public markets” for fundraising.
The 2012 Jobs Act encouraged so-called confidential filings, under which companies can submit paperwork to the SEC ahead of an IPO without having to make it public. The provision was available, however, only to companies with less than $1bn of annual revenue.
Confidentiality means that companies can keep their financing intentions, business strategy and operating performance private while the SEC reviews their offering prospectus. Nearly three-quarters of all US IPOs had taken advantage of confidential filings since the passage of the Jobs Act, according to Dealogic.
“By expanding a popular Jobs Act benefit to all companies, we hope that the next American success story will look to our public markets when they need access to affordable capital,” said Mr Clayton.
“We are striving for efficiency in our processes to encourage more companies to consider going public, which can result in more choices for investors, job creation, and a stronger US economy,” he added.
The SEC move comes during an intense debate over what lies behind a long-term decline in US listed companies and a more recent drop-off in IPOs.
Last year was the weakest for the US listings market since the aftermath of the financial crisis in 2009.
Some stock exchanges and pro-business groups have argued for easing regulations and a potential “ Jobs Act 2.0”. Others have said factors such as a robust market for private funding and high mergers and acquisitions activity are bigger contributors than regulation to the shrinking ranks of publicly listing companies.
Thursday’s change was a “staff action” from the SEC’s division of corporation finance rather than a rule change, which would have required putting the plan out for public comment. It will take effect on July 10.
Under the rules, the SEC will review initial offering documentation and revisions on a non-public basis, but companies need to release their paperwork publicly at least 15 days ahead of any investor roadshow or when the registration becomes “effective” and a company becomes able to issue its shares.
Mr Clayton signalled interest in encouraging public listings at his Senate confirmation hearing, when he said in prepared remarks: “It is clear that our public capital markets are less attractive to business than in the past. As a result, investment opportunities for Main Street investors are more limited. Here, I see meaningful room for improvement.”