Twitter – and Investors – Gain from JOBS Act Regulatory Relief
WASHINGTON, Oct. 4 – In its much-anticipated initial public offering filing released Thursday night, Twitter unveiled a company with some room for growth – much smaller than many expected. Twitter also revealed that it will use deregulatory provisions of the bipartisan Jumpstart Our Business Startups – or JOBS Act – that grant temporary reprieves from red tape to small and midsize public companies.
John Berlau, senior fellow for finance and access to capital at the Competitive Enterprise Institute, says these are developments to cheer. "Since the JOBS Act went into effect, there has been a notable increase in small and midsize companies going public," Berlau writes on OpenMarket.org.
As Berlau explains, this trend means "greater opportunity for ordinary shareholders to grow wealthy with the company," and "going public at an earlier stage actually lessens the chance that an IPO will face a Facebook-type fiasco." He writes, “the size of Facebook’s IPO—over $100 billion in market capitalization—may have made it just ‘too big to succeed'"
In its filing, Twitter indicates it will use the JOBS Act's five-year exemptions from the "internal control" mandates of the Sarbanes-Oxley Act of 2002, as well as from onerous provisions of the Dodd-Frank Act of 2010. Berlau maintains ordinary investors should be allowed to choose the risks they take.
"There will be risks with Twitter as there are with every other public company," Berlau says. "Yet a year-and-a-half after the JOBS Act’s “on-ramp” went into effect, there have been virtually no scandals involving 'emerging growth companies.' On the other hand, we are observing this fall the fifth anniversary of companies fully subject to Sarbanes-Oxley, such as Lehman Brothers and American International Group, imploding and taking down the economy with them."
>> Read John Berlau's post on OpenMarket: Twitter IPO a Vindication of Bipartisan JOBS Act