Emerging Growth Companies (EGCs)
- The Jumpstart Our Business Startups (JOBS) Act became effective April 5, 2012.
- The law created a new class of issuers called Emerging Growth Companies (EGCs), and provides flexibility for EGCs pursuing IPOs.
- EGCs are issuers with less than $1 billion of annual gross revenue during their most recent completed fiscal year.*
- An issuer that is an EGC at IPO will remain an EGC until the earliest of:
- The last day of the fiscal year five years after its IPO;
- The last day of the fiscal year in which it has gross revenues of $1 billion or more;*
- The date it has issued more than $1 billion in non-convertible debt during a three-year period; and
- The date it becomes a “large accelerated filer” (generally an issuer with a public float of at least $700 million that has been publicly reporting for at least one year).
- In December 2015, Congress passed the Fixing America’s Surface Transportation (FAST) Act, which modified the JOBS Act in certain respects:
- Public filing of the registration statement required only 15 days before road show launch (down from 21 days under the JOBS Act).
- Certain EGC benefits (e.g., two years of financial statements) locked in upon initial confidential submission through IPO.
- 52 of 67 (78%) IPO issuers were EGCs.
*On March 31, 2017, the SEC adopted amendments to increase the $1 billion annual gross revenue threshold to $1.07 billion. The amendments will become effective upon their publication in the Federal Register. The increase was due to a statutorily required inflation adjustment. Because the $1.07 billion threshold was not in effect during 2016, all issuers in our study qualified as an EGC under the $1 billion threshold.