Hot Topics in Public Company Transformation: Considering Going Public - Readiness Assessment in the Wake of the JOBS Act

 
 

 
 

The market for initial public offerings (IPOs) continues to stay somewhat active after several years of relatively dormant activity. And without question, technology IPOs have been among the most noteworthy over the past year, with social media companies leading the way. Facebook, Groupon, LinkedIn, Yelp and Zynga are among the more notable recent IPOs.

However, for many emerging companies, the costs and effort around Sarbanes-Oxley (SOX) Section 404(b) requirements (external auditor attestation of internal control over financial reporting) and other reporting requirements make the process of going public a daunting quest. Granted, the Jumpstart Our Business Startups (JOBS) Act exempts so-called “emerging growth companies” (EGCs) from certain regulatory requirements for up to their first five years as a public company – among these requirements is compliance with SOX Section 404(b). These companies would still need to be compliant eventually, but the proposed changes are intended to provide substantial time to meet these requirements and will potentially encourage more companies to pursue an IPO – in turn helping to spur job creation.