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The newest feature on Knowledge Mosaic: A search filter on Emerging Growth Companies

March 29, 2013

This Friday will mark one year since the inception of the JOBS Act.  But at Knowledge Mosaic we’re getting a jump on commemorating the anniversary.   Yesterday, we released a search filter allowing you to narrow your SEC Filings query to filers who have self-identified as Emerging Growth Companies (“EGCs”) under the JOBS Act.

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Why is this a big deal?  Because claiming the status of EGC entitles  its bearer to all sorts of perks.  Quite simply, EGCs are not beholden to the same set of rules as other public companies.  They don’t face the same restrictions on communications with certain parties prior to an IPO.  They’re allowed to file the initial paperwork for their IPO confidentially,  and — if things aren’t going as well as they’d hoped — to rescind it without anyone being the wiser.  They are subject to less process around their reporting of internal controls, and they are completely exempt from Say-on-Pay and golden parachute rules.   They’re allowed to disclose fewer audited financial statements and less executive compensation data .

The idea behind the EGC provision in the JOBS Act was to remove as many obstacles as possible between emerging companies and capital markets.  ( In theory, less regulatory burden would translate into more IPOs and, eventually, more money and jobs.)  In line with this approach, the engineers of the JOBS Act did not put in place a lot of hoops for companies to jump through in order to be eligible for EGC status.  Basically, you have to have less than $1 billion in annual revenue and cannot have sold common stock on the public market before December 2011.  Aside from a few other obscure restrictions that don’t affect most filers, that’s it.  Meaning an awful lot of companies qualify as EGCs.

One year later, how many have claimed that status?  By our count (as of yesterday), 882.  These 882 filers have collectively submitted over 45,000 filings with the SEC — roughly half of which came before the passing of the JOBS Act.  Indeed, many go back to the 1990s.  How is that possible?  Because many so-called “emerging” growth companies have been around a really, really long time.  (Remember that on Knowledge Mosaic, company-specific characteristics such as industry, location, EGC status, etc. only pertain to the company as it is today.)  Again, qualifying for EGC status was not designed to be a difficult thing.

Nor is finding filings by EGCs, if you have Knowledge Mosaic.

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