News & Analysis
The JOBS Act at FreedomFest: Jump-Starting Wealth?
The JOBS Act, whose initials stand for Jump-Start Our Business Start-Ups, went into effect immediately after it was passed on April 5, leaving the SEC to decide on the fly what companies it covered. The law's clearest eligibility requirement is that a company have annual revenue of less than $1 billion. It also sets certain caps on a company's outstanding debt and market capitalization. – Wall Street Journal
Dominant Social Theme: We had a fit of common sense. Momma, stop me!
Free-Market Analysis: What is a public market? It's whatever (mostly US) regulators say that it is. But now, for the first time in about 75 years, public markets are undergoing an evolution.
The evolution, it would seem, is spelled "JOBS Act."
Recently, Daily Bell Chief Editor Anthony Wile stated: "I encourage all Daily Bell readers interested in gaining a better understanding about the geopolitical and monetary factors influencing today's major financial trends to attend FreedomFest 2012. The lineup of speakers is outstanding and valuable information will doubtless be offered through this important three-day gathering."
The solution that Wile referred to is in part centered around the above-mentioned JOBS Act that will receive a good deal of attention at FreedomFest from such highly regarded free-market thinkers as Mark Skousen and the Daily Bell's own editorialist, Ron Holland.
Sometimes legislators do get good ideas, mostly when they have been concentrated by the specter of doom descending on their salaries. In this case, US federal legislators and regulators have made the marketplace so onerous that there are about 100 million people out of work. Public discontent is rising in a big way.
And that has concentrated minds ... The JOBS Act lets young, private companies move toward an initial public offering without being dragged down by the heavy regulatory weights that have been chained around them over the past half-century link-by-legislative-link.
Yes, various securities authorities have made the OTC and Pink Sheet markets so regulated that most small companies are finding the process unworkable. The JOBS Act puts the onus back on the marketplace itself – basically taking the regulatory authorities out of the loop, at least somewhat.
It is truly a historical occasion, where regulatory facilities have come under such pressure that they have acted in a practical manner. The news has excited both Wall Street and Main Street. Entrepreneurs – especially in the libertarian community – perceive the first green shoots of market-based promise.
Daily Bell contributor Ron Holland has commented on the JOBS Act in the past, as follows:
The JOBS Act is actually good news for start-up and private company investors that will provide more liquidity, create an IPO boom and may be the beginning of a trend by Washington away from more regulatory and bureaucratic solutions holding down a nation and economy that simply can't compete with the rest of the world.
Now, this could be an aberration, an oversight or simply the result of lobbying by Wall Street interests concerned about their future. It also could be preservation planning by politicians scared to death of re-election losses and their personal safety after what they have done to our nation, economy, wealth and freedoms. After all, looking at the civil unrest in Europe that could expand to the US, they're in a corner. I believe our politicians only have two options: a return to free-market capitalism or bullets and, being politicians, they'll probably explore both options.
Congress passed the JOBS Act on March 27, 2012 partly because given this recession and high unemployment environment what politician would not vote for a JOBS Act? Although the legislation actually has nothing to do with jobs or employment in the near term, perception is certainly reality inside the Washington beltway and after all, this is an election year.
The name actually stands for "Jumpstart Our Business Start-ups" and the goal is to revive economic growth in the United States by halting the serious decline in initial public offerings (IPOs). Congress decided in its wisdom to try a unique and foreign idea, by "Washington standards," that works well in Asia. They decided to actually reduce the regulatory burden on companies wanting to raise capital in the US. The fact is over the last decade in America there has been an 80% drop in small companies going public. They seek to remedy this situation.
You can see the full article here: "The JOBS Act: Washington Takes One Step Back Toward Capitalism."
The act makes it less difficult for small companies to go public by removing parts of the Sarbanes-Oxley Act and other complex legislation: fewer auditing requirements, more ability to communicate to more investors ... these are parts of what makes the JOBS Act compelling. Private firms can also delay onerous disclosure requirements until shareholders reach 2,000, up from the limit of 500 before the act was passed.
In many cases, "special situations" were restricted to what were called "accredited" investors but these regulations have been modified as well. Now under the JOBS Act there is the opportunity to "crowdfund." Average investors will be able to participate in lucrative potential offerings formerly restricted to wealthy investors.
This last point is perhaps the most important. The financial pornographers – Bloomberg, MSNBC, etc. – are already beginning to pitch the JOBS Act – and inevitably will begin identifying certain companies over time to flog. It is clear to insiders that determining WHICH companies will be flogged may be the key to profiting in a big way from JOBS Act regulatory adjustments.
Conclusion: For savvy investors and entrepreneurs, events such as FreedomFest (click here for more info on how to attend this year's event) and others hold the key to identifying these non-public entities before they are picked up by the larger media machine. The so-called pre-IPO market – an emergent one – is the key that may unlock the wealth inherent in the JOBS Act. Given that fiat money inevitably destroys such opportunities over time, creating first a boom and then a bust, the opportunities to take advantage of the JOBS Act may begin now.