The JOBS Act that Congress passed last year to make it easier for early-stage companies to raise capital has failed to wow capital market executives.
That’s the conclusion of a new survey by BDO USA LLP, an accounting and consulting firm with an office in Woodbridge.
Only 14 percent of capital markets executives believe the legislation, short for Jumpstart Our Business Startups, is positively impacting the market for initial public offerings, according to BDO.
Most, 58 percent, say the JOBS Act has not had a positive impact, while 28 percent say it’s too early to judge. Of those who don’t believe the act has had positive impact, more than two-thirds predict the law will never achieve its desired goal of increasing the number of businesses going public.
This marks a sharp decline from one year ago, when 55 percent of investment bankers surveyed by BDO predicted positive impact. By last winter, that figure had fallen to 29 percent.
“When it comes to the JOBS Act, first impressions were certainly deceiving for the capital markets community,” said Wendy Hambleton, partner in the capital markets practice at BDO USA, in a statement. “When the new law was introduced last year, bankers viewed it as an engine for more IPOs from emerging businesses, but in practice, the law has fallen far short of those lofty expectations.”
Hambleton added that it is still early to cast a verdict on the JOBS Act, noting that about 200 businesses have taken advantage of the law’s confidential filing provisions provided to companies with less than $1 billion in revenue.
“If a strong majority of these confidential filers actually through with an offering, the perception of the JOBS Act among investment bankers could again change drastically,” Hambleton said.
The JOBS Act also allows for investments vehicles known as crowdfunding, which allow startups to raise up to $1 million from a wide pool of small investors through the Internet exempt from the standard Securities and Exchange Commission registration process. The SEC is still writing the rules that will govern crowdfunding vehicles.
BDO said while crowdfunding options would seem to enable businesses to postpone plans to go public, only 19 percent of capital market executives surveyed expressed concern that crowdfunding will negatively impact IPOs.
Coming Monday: Can New Jersey’s cash-hungry life sciences industry get a lifeline from crowdfunding? Read about the JOBS Act, crowdfunding and how it could shape the industry Monday in the print edition of NJBIZ.
Reporter Tom Zanki is @BizTZanki on Twitter.
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