Middle Market Ipo Cost Act

Floor Speech

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Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2812) to require the Securities and Exchange Commission to carry out a study of the costs associated with small- and medium-sized companies to undertake initial public offerings, as amended.

The Clerk read the title of the bill.

The text of the bill is as follows: H.R. 2812

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.

This Act may be cited as the ``Middle Market IPO Cost Act''. SEC. 2. STUDY ON IPO FEES.

(a) Study.--The Comptroller General of the United States, in consultation with the Securities and Exchange Commission, in consultation with the Financial Industry Regulatory Authority, shall carry out a study of the costs associated with small- and medium-sized companies to undertake initial public offerings (``IPOs''). In carrying out such study, the Comptroller General shall--

(1) consider the direct and indirect costs of an IPO, including--

(A) fees of accountants, underwriters, and any other outside advisors with respect to the IPO;

(B) compliance with Federal and State securities laws at the time of the IPO; and

(C) such other IPO-related costs as the Comptroller General may consider;

(2) compare and analyze the costs of an IPO with the costs of obtaining alternative sources of financing and of liquidity;

(3) consider the impact of such costs on capital formation;

(4) analyze the impact of these costs on the availability of public securities of small- and medium-sized companies to retail investors; and

(5) analyze trends in IPOs over a time period the Comptroller General determines is appropriate to analyze IPO pricing practices, considering--

(A) the number of IPOs;

(B) how costs for IPOs have evolved over time for underwriters, investment advisory firms, and other professions for services in connection with an IPO;

(C) the number of brokers and dealers active in underwriting IPOs;

(D) the different types of services that underwriters and related persons provide before and after a small- or medium- sized company IPO and the factors impacting IPOs costs;

(E) changes in the costs and availability of investment research for small- and medium-sized companies; and

(F) the impacts of litigation and its costs on being a public company.

(b) Report.--Not later than the end of the 360-day period beginning on the date of the enactment of this Act, the Comptroller General shall issue a report to the Congress containing all findings and determinations made in carrying out the study required under subsection (a) and any administrative or legislative recommendations the Comptroller General may have.

Mr. Speaker, I rise in support of H.R. 2812, the Middle Market IPO Underwriting Cost Act. I thank my colleagues from both sides of the aisle, Representatives Himes and Lawler, for working on this important piece of bipartisan legislation that will help ensure that our IPO market remains competitive and attractive, especially for small- and medium-sized companies.

I thank Mr. Himes for his willingness to work with the majority, and specifically Congressman French Hill of Arkansas, to reach an agreement on this legislation.

Staff have been working on this since the bill was marked up in April, and I am happy to see that the study will now be carried out by the GAO in consultation with the SEC and FINRA.

Companies have two ways of accessing capital in the securities markets to fund their operations: an initial public offering, IPO, where they sell securities publicly through a registered offering with the SEC, or a private offering under an exemption from registration.

Accessing capital through an IPO is a significant step for a company because there are considerable up-front costs, as well as ongoing, increased costs associated with the company's reporting requirements as a public company.

Before an IPO, companies often spend tens of millions of dollars gathering and compiling mandatory information to submit to the SEC and make available to the public for the sale of its securities.

The SEC itself has estimated that the average cost of just achieving regulatory compliance for going public is $2.5 million, which may not include additional costs of hiring professionals to help undertake the IPO.

However, additional data is required to achieve a better understanding of the costs of the added regulatory and professional services associated with undertaking an IPO and becoming a public company.

As a result, the study required under this bill will help Congress and the market better understand the costs associated with small- and medium-sized companies to undertake initial public offerings, IPOs, and become public companies.

Mr. Speaker, H.R. 2812 is a balanced and thoughtful bill that will give us the information to better understand those costs with going public so that Congress can continue the work to make our public markets the most attractive and competitive in the world.

Mr. Speaker, for this reason, I urge my colleagues to support H.R.

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Mrs. WAGNER. Mr. Speaker, I strongly urge my colleagues to support H.R. 2812, and I yield back the balance of my time.

Ms. JACKSON LEE. Mr. Speaker, I rise today in support of H.R. 2812, the Middle Market IPO Cost Act.

H.R. 2812 would require the Securities and Exchange Commission to study and report on the costs encountered by small- and medium-sized companies when undertaking initial public offerings and certain offerings exempt from securities registration requirements.

The report commissioned through this bill will provide information to facilitate cost reduction for small and medium-size businesses when they conduct an initial public offering and ``go public.''

This bill constitutes an important step toward protecting small and mid-size businesses from the penalties they currently face under historic fee structures and restrictions on IPO funding.

The Houston area leads the Nation in small business development and is one of the top emerging ecosystems for startups globally.

In 2021, over 150,000 new-business applications were filed in the Houston area.

This bill will boost these Houston businesses by making it easier for them to grow and create jobs.

By going public, businesses in Houston and beyond will be able to give American families the opportunity to invest directly in their businesses and build wealth for the future.

Mr. Speaker, I stand for American families. I stand for economic growth and small businesses. This bill will equip Congress to better understand and address the burdens and costs of conducting an initial public offering.

I urge my colleagues to join me in supporting this bill and in working to ensure accessible economic opportunities for all.

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Mrs. WAGNER. Mr. Speaker, on that I demand the yeas and nays.

The yeas and nays were ordered.

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