The two-year-old Jumpstart Our Business Startups (JOBS) Act has definitely revitalized the IPO market, according to a paper discussed in an article published by Bloomberg,
But that still hasn’t silenced some critics who contend that the IPO surge might have more to do with a bullish stock market than with a key provision in the law that stipulates that companies that have less than a $1 billion in revenue can apply for IPOs “confidentially.” That means they can withhold “proprietary data from competitors if they later cancel plans to go public.”
Since the passage of the JOBS Act, there have been 25% more IPO filings than usual, according to the paper’s authors, Matthew Gustafson and Laura Casares Field of Penn State and Michael Dambra of SUNY-Buffalo. Bloomberg notes that last year there were 209 IPOs, the highest number since 2007.
The uptick in filings have been a boon for the New York Stock Exchange and NASDAQ, both of which are paid fees by companies seeking listings. Citing a study by law firm Latham & Watkins, which lobbied for the JOBS Act, the Bloomberg piece says that “NASDAQ, in particular, has benefited from the increase in public offerings, with 59% of eligible companies that went public in 2013 joining that exchange.”
Following the passage of the JOBS Act, about “90% of companies eligible to file confidentially with the U.S. Securities and Exchange Commission since 2012 have done so,” according to the news service. Among them are Twitter and GoPro. However, it’s not known if the discreet IPO-filing disclosure clause in the JOBS Act was a key reason that either of these firms opted to go public.
Gordon Brooks, the CFO of Aerohive NetworksAerohive Network, which launched its IPO in March, told Bloomberg that the confidentiality provision was a catalyst behind the firm’s decision to go public. “It was very important,” Brooks reportedly said. “Our initial filing with the SEC was confidential. It allowed us to have a dialogue with the SEC and their comments outside of the public disclosure.”
Some experts, however, feel that it’s hard to discern how much of the IPO surge has been spawned by the JOBS act and how much by the bull market. “Some of the increase in biotech IPOs is undoubtedly due to the JOBS Act,” Jay Ritter, a professor at the University of Florida said in an e-mail to Bloomberg. But the “bull market for biotech stocks makes it difficult to tell how much,” he added.
According to Bloomberg, the NASDAQ Biotechnology Index is “up more than 150% since the end of 2011.”