Twitter and the JOBS Act
Twitter and the JOBS Act
For all of you who are under the illusion that social media is confined to those who have too much time on their hands and really is a waste of time… think again! Twitter announced on September 12, 2013 that it has submitted the S-1 Form to the Securities and Exchange Commission (SEC) petitioning to become a publicly traded company. The SEC rules under the Jumpstart Our Business Startups (JOBS) Act allow it to qualify as a small company, which should have revenue less than a billion dollars. Twitter has kept its’ financial data confidential until 21 days before the company starts its road show to solicit investors.
The new rule under the JOBS Act helps “small” companies like Twitter in many ways. First, it allows companies that are thinking about going public to test the waters—they can gauge investor reaction, get feedback from the S.E.C. on their filings, and so on—before deciding if they want to go ahead with an I.P.O. Before the JOBS Act was implemented, an I.P.O was a one-way road. If a company filed the public “S-1” with the SEC then later withdrew, it not only damaged its reputation, but it also it gave the competitors an inside look at its financials, customers and strategies.
Twitter utilized JOBS Act Title I Reopening American Capital Markets to Emerging Growth Companies Act. The new rule often referred as “IPO On-Ramp” by securities practitioners, facilitates and simplifies the registration rules and processes in connection with an initial public offering (IPO) for a newly created category of company. This new category is referred to as an “emerging growth company” and is generally defined as an issuer with total gross revenue of less than $1 billion dollars.
Compared to the IPO On-Ramp, the EB-5 projects are exclusively conducted as private offerings, unless some EB-5 projects decide to take on the challenge of completing an IPO. Registering one’s securities publically entails ongoing reporting requirements for both the issuer as a legal entity and its principals as individuals. EB-5 projects have a much less onerous registration exemption reporting requirement with the SEC and an on-going reporting requirement with USCIS.
Courtesy to James Surowiecki from the New Yorker