Investment Bankers Warming to Jobs Act According to BDO USA, LLP

July 2015

Jerry Walsh
(631) 419-9008

Chicago, IL – According to a new study by BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, capital markets executives at leading investment banks are narrowly divided on how the three-year old JOBS Act has impacted the U.S. market for initial public offerings (IPOs). Although only a slight majority (51%) of the bankers believe the Act has had a positive impact on the number of businesses going public, this represents a major attitude change from two years ago when only 14% of the bankers thought the new Act was having a positive impact on offerings.  When asked if the JOBS Act was the most prominent reason for the large increase in U.S. IPOs in 2013 and 2014, just under one-quarter (24%) agreed.
“When it was first enacted there was much anticipation that the JOBS Act would stimulate the U.S. IPO market by easing the regulatory hurdles for smaller, emerging growth companies.  When the new law did not produce an immediate increase – and bankers were unable to see the growing IPO pipeline due to the Act’s confidential filing provision – capital markets executives were truly underwhelmed by the Act’s impact in 2013,” said Chris Smith, a partner in the Capital Markets Practice at BDO USA.  “Two years later, a much larger percentage of the capital markets community is acknowledging the positive impact of the JOBS Act on offering activity, with almost one-quarter citing it as the primary factor in the strong growth in IPO activity in 2013 and 2014.”
Other major findings on the JOBS Act from the 2015 BDO IPO Halftime Report Survey:
  • Lack of Transparency.  A majority (54%) of capital markets executives believe the lack of transparency brought about by the JOBS Act’s confidential filing process has had a negative impact on their ability to advise clients on their offerings due to a lack of information on potential competitors for investor dollars.  In fact, more than two-thirds (69%) of bankers are in favor of the SEC providing confidential filing data on an aggregate and anonymous basis in order to provide increased visibility of the IPO pipeline.
  • Reduced Disclosures.  The JOBS Act allows emerging businesses to provide less information and fewer financial disclosures in their IPO documents and subsequent filings.  At the time of its enactment, some critics predicted the reduced disclosures would have a negative impact on the pricings of these IPOs, but three years later most bankers (59%) do not believe that it has.
  • Increased Risk?  Another criticism of the JOBS Act, when it was introduced, was that the rollback of regulatory requirements for newly public businesses could open the door to market manipulation and fraud.  Today, less than half (48%) of capital markets executives believe the rollback of regulatory requirements has increased the chances of scandals at these businesses, and only 9 percent describe the increased risk as substantial.
The BDO IPO Halftime Report is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, on behalf of BDO USA.  Executive interviewers spoke directly to 100 capital markets executives, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's leading investment banks.
BDO USA is a valued business advisor to businesses making a public securities offering.  The firm works with a wide variety of clients, ranging from entrepreneurial businesses to multinational Fortune 500 corporations, on a myriad of accounting, tax and other financial issues.
BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals.  The firm serves clients through 59 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of 1,328 offices in 151 countries. 
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