EGCs: A Look at IPO Issuer Accounting Fees After April 2012

The JOBS Act, enacted on April 5, 2012, was intended to give small businesses a jumpstart. The act created a new category of company: the Emerging Growth Company (EGC), defined as an issuer with “total annual gross revenues” of less than $1 billion that completed the IPO process after December 8, 2011. Such companies are exempt from certain regulatory requirements, including certain aspects of the IPO (initial public offering) process. The hope was that, by lowering costs and regulatory burdens, these exemptions would help give smaller businesses access to the funds they needed to grow.

But what effect has the act had on the bottom line for small businesses? During the period  of April 5 – December 31, 2012, 119 companies filed initial registration statements. Of these filers, 78 companies (65.55%) identified themselves as EGCs.  The chart below shows the average accounting and legal fees for EGC’s and non-EGC’s.


As indicated in the table above, non-EGC’s are, on average, subject to higher accounting and legal fees. Non-EGC’s, however, are frequently larger entities with more complex business structures. When the size of these two types of companies is taken into consideration, the picture is slightly different.


The table above indicates that the JOBS Act may not have brought as much relief in raising capital as initially expected.