NEW YORK, Nov. 17, 2014 /PRNewswire/ -- The passage in 2012 of the Jumpstart Our Business Startups (JOBS) Act has had little impact on the frequency of reverse public offerings (RPO's), an alternative to traditional Initial Public Offerings (IPO's), according to a new study released by the New York City law firm, Barton LLP (www.bartonesq.com).
The principal aim of the JOBS Act had been to rekindle the IPO market. By making the pathway to the IPO easier, the RPO—a transaction structure that regulators and analysts debunk—should have become rarer. The Barton study, however, demonstrates that the RPO is alive and well, and is likely to stay so.
Barton analyzed the 168 RPO's that were completed from April 2012 through June 30, 2014. The average number of RPO's per quarter during that period was 19 and stayed relatively constant throughout the period. During the nine quarters within that period, RPO's per quarter ranged between 10 and 28. Based on the similarity of the quarterly averages, the study concluded that the JOBS Act has thus had little impact on the frequency and use of RPO's since its passage in April 2012.
The transactions analyzed included all transactions in which a shell company made a filing with the SEC disclosing it had changed its status from a shell to an operating business and had engaged in a concurrent merger or share exchange transaction. The study excluded transactions involving special purpose acquisition companies.
Barton Corporate Department Chair, William A. Newman, who led the study, said "We are not surprised by the results of our study. The JOBS Act may have made the IPO process easier for many companies. That said, the expense, regulatory impediments and uncertainty of the IPO are wholly absent from the RPO, which is why many entrepreneurs continue to use these deals. With the right professional guidance, through the RPO, almost any legitimate operating business can gain access to the public markets without having to deal with gatekeepers, leaving the market to decide which businesses succeed and which do not."
In addition the study reveals business to business, food and beverage, and life sciences companies used RPO's far more frequently than companies in other industries. For those companies, the RPO is a mainstay for access to capital.
Melissa M. Krantz
Krantz and Company
SOURCE Barton LLP