By Olivia Oran
Jan 25 Shares of U.S. companies that went public
under the Jobs Act are outperforming those that did not, data
What exactly that means is hard to say. To supporters of the
controversial Jumpstart Our Business Startups (JOBS) Act, which
loosened investor protections for investments in smaller
companies, the strong performance underscores the benefits of
the law. The Jobs Act allows companies to raise capital and
shareholders to benefit from their growth.
To the law's skeptics, the data means nothing because the
Jobs Act has only been in effect for nine months, which also
happens to be a period when U.S. stock markets have been
rallying and investors have grown more willing to take risk.
"The real test will come when it isn't doing as well and you
have investors getting nervous about smaller, riskier
companies," said Reena Aggrawal, a professor of business
administration at Georgetown University's McDonough School of
Share prices for companies that went public under the Jobs
Act have on average risen 28.9 percent from their offer price,
compared with 13.1 percent for those that did not, according to
market data firm Ipreo.
Since the Jobs Act went into effect in April of 2012, 61
companies have gone public as "emerging growth companies" under
that law, while 30 bigger companies that are not eligible for
the law's benefits have gone public. Being considered an
"emerging growth" company under the law allows an enterprise to
pay lower registration fees and disclose less information to
investors when it goes public.
Jobs Act companies, which are largely concentrated in high
growth industries like technology and biotech, have also
outperformed the Russell 2000 Growth index, a barometer of small
cap growth stocks that rose roughly 11 percent during the same
For example, shares of Eloqua, a business software
company which went public in August 2012 under the Jobs Act,
have more than doubled since their IPO. The shares closed on
Thursday at $23.49. Oracle said in December it was acquiring the
company for about $810 million.
Non-Jobs Act companies, meanwhile, are typically larger and
more mature. Some are also private equity-backed like plastics
product maker Berry Plastics Group Inc which went
public at $16 in October and has seen its shares rise around 10
To be sure, lawyers and bankers say that most "emerging
growth" companies that go public under the law are not taking
full advantage of its provisions because investors are not
willing to be too lenient. For example, most companies are
reporting as much information as a larger company would and are
following the same accounting rules regarding items like outside
"By and large, I'm seeing issuers generally adhere to
standards of disclosure applicable to companies prior to the
Jobs Act," said Glenn Pollner, a partner at Gibson, Dunn &
Crutcher, who works on capital markets transactions.
Some "emerging growth" companies are taking advantage of the
law's confidential filing provision, which allows firms to
submit registration documents to the SEC away from public eyes.
Investors say that because the law has removed some of their
protections, they are evaluating emerging growth companies even
more closely than before.
And despite strong performance from these companies so far,
consumer advocates still say they're skeptical of the law's
"When you open the flood gates, reduce regulation and make
it easier for even legitimate companies to go public, it's also
an invitation for bad actors," said Sally Greenberg, executive
director of the National Consumers League, a non-profit group
that represents consumers on marketplace issues.
In the end, it will take awhile before the effects of the
law are clear, experts said.
"It's still too early to tell," Georgetown's Aggrawal said.