Something new and significant is taking shape. For a variety of reasonsthe impact of the JOBS Act, the growing popularity of equity private placements, the appearance of new trading markets for venture capital and other non-reporting companiesa new tier of companies is growing rapidly that is composed of issuers that are not “reporting” companies, but that do have a significant number of shareholders. In terms of the size of their shareholder class, these companies overlap with public companies, but they trade in the darkand actively. More importantly, as their number grows, it is predictable that existing and new trading venues will begin to compete to attract and capture the trading interest in these stocks. This column will call these firms “semi-public companies” to reflect their intermediate status, midway between truly private firms (such as early stage venture capital startups and family-held firms) and public companies.
The development that is most associated with the appearance of these new semi-public companies is the enactment of the JOBS Act earlier this year. In truth, that legislation was not responsible for the appearance of semi-public companies, but, much like a shot of steroids, that act will grow their size and number rapidly. By amending §12(g)(1) of the Securities Exchange Act to raise the mandatory threshold for “reporting company” status to 2,000 shareholders of record,1 the JOBS Act has also ensured that all companies that are not yet a “reporting company” will have considerable discretion and a debatable choice about whether to become one.
