Middle Market Ipo Cost Act
Floor Speech
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Mr. HIMES. Mr. Speaker, I offer a big thank you to the gentlewoman from California (Ms. Waters), the ranking member, and to the gentleman from Arkansas (Mr. Hill), my good friend, for their support of this bill.
I just want to elaborate for a minute on what I think the need is for this bill. This grew out of the work we did many, many years ago on the JOBS Act, in which we observed that the regulatory expenses faced by a company seeking to go public were roughly $2 million to $4 million in size.
It is also true that a small IPO, a medium-sized IPO, anything up to about $200 million, is subject almost always to a 7 percent gross spread. That is 7 percent of the proceeds, or in the case of a $200 million offering, $14 million. On a $150 million offering, it is $10 million, well more than twice the regulatory cost that we identified in working on the JOBS Act.
What is very strange about that 7 percent fee is that, regardless of what period of time you examine, IPOs from about $30 million up to about $200 million are always subject to a 7 percent fee. Now, all of us who observe markets know that that is odd behavior in what should be a competitive market.
This is money, of course, that goes to the investment banks that underwrite these IPOs. I know this because I spent many years working in those investment banks.
The bill here simply says, having done the work that we did on the JOBS Act, what can we do to examine the underlying market forces or nonmarket forces creating this 7 percent gross spread and costs of many, many millions of dollars for companies when they are small and capital is at a premium.
This study, I think, would illustrate some things that would allow us to do even better than we did in the JOBS Act and make it that much more possible, maybe even probable for companies to seek capital in our public markets.
Mr. Speaker, I thank once again the chairman and the ranking member of the committee for their support.
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