NEW YORK: US federal securities regulators are eyeing a sweeping review of rules that would ease long time constraints on share issues by privately owned companies, The Wall Street Journal reported Friday.
Citing a review by the Securities and Exchange Commission (SEC) disclosed in a letter to a lawmaker, the Journal said the plan would help privately held firms like Facebook, Twitter and Zynga raise more money without facing the more stringent requirements associated with becoming a listed company.
Among the changes under consideration are facilitating the process for private firms to publicize share offerings and raising from 499 the number of shareholders they can have without having to open their books.
The move would allow fledgling companies to stay private but still raise funds by selling shares to more investors, rather than having to undergo an initial public offering of stock to the general public.
The rules currently in effect discourage private companies from issuing shares, "resulting in less investment and fewer jobs," House Oversight Committee Chairman Darrell Issa, a Republican congressman who received the letter from SEC chair Mary Schapiro, told the newspaper.
Schapiro wrote Issa that the SEC was "taking a fresh look at our rules to develop ideas for the commission about ways to reduce the regulatory burdens on small business capital formation."
But Lawrence Goldstein, founder of institutional investor Santa Monica Partners L.P., told the Journal he would "absolutely be concerned" if the SEC raised to over 500 the number of shareholders a company can have without incurring tough reporting obligations while issuing shares privately.
The SEC can raise the limit without congressional approval, according to Schapiro.
US stock listings have been dwindling, with the number of US IPOs dropping to about 130 per year since 2001 from an average of 503 in the 1990s, the Journal noted.
But the value of transactions in shares of private companies has grown, nearly doubling last year to $4.6 billion from $2.4 billion, according to research firm and broker-dealer NYPPEX. It expects the value to reach $6.9 billion in 2011.
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