On June 27, 2016, the SEC released a proposal that would increase the number of companies eligible to be “smaller reporting companies.” SRCs get the benefits of reduced disclosure over other public companies, such as two years of financial statements instead of three. To be an SRC, currently you have to have a public trading float value below $75 million, or if your float is zero, then revenues less than $50 million. The SEC is proposing increasing these thresholds to either a public float of less than $250 million, or if no float, then revenues of less than $100 million.
The JOBS Act created “emerging growth companies” (EGCs) which get some of the same benefits as SRCs. But EGC benefits go away with time whereas the SRC benefits do not. Plus, companies that went public before the JOBS Act generally cannot be EGCs. So why is all this cool? Because it was recommended multiple times at the annual SEC small business conference by folks like your humble blogger, and also by the SEC’s advisory committee on small and emerging companies.
Why else is it cool? Because the pool of SRCs has dropped from 42% to 32% of all public companies since the SRC rules were set up. So fewer companies get the benefit. With these proposed changes the SEC projects it would go back to 42%.