Impact of the JOBS Act on the IPO Market (Series: THE JOBS ACT - A RETROSPECTIVE & A LOOK AHEAD 2018)

Practical and entertaining education for
attorneys, accountants, business owners and
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The material in this webinar is for informational purposes only. It should not be considered
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appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
While Financial Poise is happy to make this PowerPoint freely available to all, the reader is
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DISCLAIMER
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MEET THE FACULTY
MODERATOR:
Robert N. Rapp Case Western Reserve
University School of Law
PANELISTS:
Jillian Sidoti Crowdfunding Lawyers.net &
Trowbridge Sidoti LLP
Kristofer K. Spreen Calfee, Halter & Griswold LLP
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ABOUT THIS WEBINAR
Regulatory burdens associated with “going public” and thereafter with “being public” are major hurdles facing smaller issuers considering the
prospects of an initial public offering (“IPO”). The JOBS Act has impacted that consideration principally in two ways. For the IPO process,
the JOBS Act established an “IPO On-Ramp” benefitting smaller issuers by easing certain restrictions for a newly defined class of issuer
known as an “emerging growth company” (EGC) that previously hampered the determination by those issuers whether even consider taking
on the burden and expense of an IPO.
This webinar explores, for example, the opportunity created by the JOBS Act for EGCs to “test the waters” prior to embarking on the
process, and the opportunity for confidential SEC filing and early regulatory assessment of the offering’s viability. For the EGC that succeeds
in an IPO, the JOBS Act “on-ramp” significantly reduces the regulatory burdens under the Securities Exchange Act reporting requirements,
for example, for a five year period. An equally significant impact of the JOBS Act on determinations by smaller issuers regarding the
IPO market is the ability of private companies to avoid becoming a public company subject to Exchange Act Section 12 registration
requirements and the panoply of regulatory requirements triggered by that registration. The JOBS Act significantly increased the threshold
number of shareholders a company may have before triggering the registration requirement, thus permitting smaller companies to remain
private longer.
This webinar episode also tackles these elements of the JOBS Act that directly impact IPO determinations by smaller issuers, and provides
practical insights and tips in making these important business decisions.
This webinar is delivered in Plain English, understandable to you even if you do not have a background in the subject. It brings you into an
engaging, even sometimes humorous, conversation designed to entertain as it teaches. And, it is specifically designed to be viewed as a stand-
alone webinar, meaning that you do not have to view the other webinars in the series to get a lot out of it.
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ABOUT THIS SERIES
Six years after enactment of the Jumpstart Our Business Startups (JOBS) Act, its impact in reducing regulatory burdens and barriers to
capital formation for start-up, small, and emerging growth companies is ripe for consideration.
JOBS Act amendments to the federal securities laws, and mandated SEC rulemaking, significantly enhanced the ability of small business
to raise capital in private offerings to accredited investors, breathed new life into a largely dormant form of limited public offering of up to
$50 million via “Regulation A,” established mechanisms for nationwide equity crowdfunding, reduced the regulatory burden for public
offerings by newly defined “emerging growth companies,” and altered Exchange Act registration and deregistration requirements for
smaller companies.
This webinar series examines how the JOBS Act has impacted capital formation through private offerings, as well as corporate finance for
small business issuers generally, and access to the “IPO” market. In each episode, seasoned practitioner panelists explain not only how
the JOBS Act has changed the regulatory landscape to date, but also how small issuers can confidently take advantage of the financing
opportunities and cost efficiencies in capital formation it has created. Panelists also discuss possible future modifications to the JOBS Act
mandated regulatory structure.
As with every Financial Poise Webinar, each episode is delivered in Plain English understandable to investors, business owners, and
executives without much background in these areas, yet is also valuable to attorneys, accountants, and other seasoned professionals. And,
as with every Financial Poise Webinar, each episode brings you into engaging, sometimes humorous, conversations designed to entertain
as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that participants will enhance
their knowledge of this area whether they attend one, some, or all episodes.
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Dates shown are premiere dates; all episodes will be available on demand after
their premiere date.
EPISODES IN THIS SERIES
Episode#1 Impact of the JOBS Act on Private Offerings. 4/26/2018
Episode#2 Impact of the JOBS Act on Corporate Finance for Small Issuers 5/24/2018
Episode#3 Impact of the JOBS Act on the IPO Market 6/28/2018
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Episode #3: The Impact of the JOBS Act on the
IPO Market

THE JOBS ACT – JUMPSTART OUR
BUSINESS STARTUPS
Signed into law on April 12, 2012 with the stated purpose of increasing
American job creation and economic growth by improving access to capital,
particularly for smaller, growing companies.
Title I: The public offering “on ramp” for “Emerging
Growth Companies”
Title II: General solicitation in private offerings under
Rule 506 of Regulation D
Title III: Equity Crowdfunding
Title IV: Regulation A-Plus
© 2018 by DailyDAC, LLC d/b/a Financial Poise Webinars™ 9

EMERGING GROWTH COMPANY PUBLIC
OFFERINGS: HOW SIGNIFICANT?
✓ During the period of January 1, 2008 through December 31, 2012 there
were 501 IPOs - and only 31 of them were in 2008, and 63 were in 2009.
✓ During the period of January 31, 2013 through December 31, 2017 there
were 1023 IPOs, with 848 of them being EGCs. All but two were either
NASDAQ or NYSE listed.
✓ EGC’s now dominate the public market, accounting for some 83% of IPOs
that have gone effective since the JOBS Act was enacted in April 2012.

MEET THE ”EMERGING GROWTH
COMPANY”
As created by the JOBS Act, an “Emerging Growth Company” (EGC), defined
in §2(a)(19) of the Securities Act of 1933, is:
“An issuer that had total annual gross revenues of less than $1,000,000,000
[now $1,070,000,000] (as such amount is indexed for inflation every five years
by the Commission to reflect the change in the Consumer Price Index for all
Urban Consumers…) during its most recently completed fiscal year.”

AN EGC REMAINS AN EGC UNTIL THE
EARLIEST OF….
✓ The last day of the fiscal year during which it had total annual gross
revenues of $1.07
✓ The last day of the fiscal year of the issuer following the fifth anniversary of
the date of the first sale of common equity securities of the issuer pursuant
to an effective registration statement under the Securities Act of 1933;
✓ The date on which the issuer has, during the previous 3-year period, issued
more than $1,000,000,000 in non-convertible debt; or
✓ The date on which the issuer is deemed to be a “large accelerated filer” as
defined in Exchange Act Rule 12b-2 (i.e., a seasoned issuer with public
float of $700 million or more).

THE “IPO ON-RAMP”
Making it easier for emerging companies to go public, and to stay public once
they have completed an IPO –all with an eye to stimulating job creation. The
“On-Ramp” includes:
• Confidential submission and SEC review of draft registration statements.
• Allowing distribution of research reports about an EGC that proposes to
file or has filed a registration statement.
• Issuer “Testing the Waters” with certain types of investors before or after
filing a registration statement.
• Reducing required financial disclosures and reporting for up to five years.

THE JOBS ACT AUGMENTED BY THE “FAST”
ACT (Fixing America’s Surface Transportation Act)
The FAST Act became law on December 4, 2015, and updated the JOBS Act by
directing:
• Simplified Registration Statement Disclosure Requirements, permitting omission
of certain financial information for historical periods.
• Allowing confidential submission of draft registration statements.
• Small Company Simplified Registration on Form S-1.
• Scaling or elimination of Regulation S-K requirements relating to EGCs.

FIRST THINGS FIRST…. LET’S STAY PRIVATE!
What Makes a “Public” Company?
Exchange Act § 12(g)(1)
Every issuer engaged in interstate commerce, or in a business affecting interstate
commerce, or whose securities are traded by use of the mails or any means or
instrumentality of interstate commerce which has total assets exceeding $10,000,000
and a class of equity securities (other than an exempted security) held of record by
either: (a) 2,000 persons; or (b) 500 persons who are not accredited investors. Asset
or number of shareholders thresholds trigger:
• Exchange Act “registration” of the security by filing Form 10;
• Application of Exchange Act periodic reporting and other requirements based
on the issuer “having a security registered pursuant to Section 12.”

THE JOBS ACT AND STAYING PRIVATE
“Registration” of securities under Securities Exchange Act §12(g), is separate
from registration of a distribution under the Securities Act of 1933 and is
triggered without regard to the fact that a company is “private.” The private
company becomes “public” when it meets the threshold asset and shareholder
levels
The JOBS Act amended Exchange Act §12(g) to permit private companies to
remain private longer –increasing the threshold number of shareholders of
record to 2000, or 500 persons who are not accredited investors.

COUNTING SHAREHOLDERS OF RECORD
(Exchange Act Rule 12g5-1)
✓ Securities identified as held of record by a corporation, partnership, trust or
other organization are deemed to be held by one person.
✓ Securities identified as held of record by one or more persons as trustees,
executors, guardians, custodians or in other fiduciary capacities with respect
to a single trust, estate or account are deemed to be held by one person.
✓ Securities held by two or more persons as co-owners are deemed to be held
by one person.

ACCREDITED INVESTORS – AS SUCH TERM
IS DEFINED BY THE “COMMISSION”
Any natural person whose individual net worth, or joint net worth with that
person’s spouse, exceeds $1,000,000, excluding the value of the person’s
primary residence from, the calculation; or any natural person who had an
individual income in excess of $200,000 in each of the two most recent years
or joint income with that person’s spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same income level
in the current year. Also includes:
• Directors, executive officers, or general partners of the issuer; and
• Institutional accredited investors: Certain banks and financial institutions, a
private business development company, and IRS Rule 501(c)(3)
organizations with total assets exceeding $5,000,000.

HEADING DOWN THE JOBS ACT ON-RAMP
STEP ONE: “TESTING THE WATERS”
Section 5(d), Securities Act of 1933:
Notwithstanding any other provision of this section [e.g. the Section 5(c)
prohibition on “gun jumping” prior to filing a registration statement] an emerging
growth company or any person authorized to act on behalf of an emerging
growth company may engage in oral or written communications with potential
investors that are qualified institutional buyers or institutions that are accredited
investors… to determine whether such investors might have an interest in a
contemplated securities offering, either prior to or following the date of a
registration statement with respect to such securities.

QUALIFIED INSTITUTIONAL BUYERS (QIBS)
(SEC Rule 144A(a)(1) under the Securities Act of 1933)-
Includes the following entities that in the aggregate owns and invests on a discretionary
basis at least $100 million in securities of issuers that are not affiliated with the entity:
• Any insurance company;
• Any registered Investment Company or Business Development Company;
• Any Small Business Investment Company licensed by the SBA;
• Any state or ERISA covered employee benefit plan;
• Certain trust funds;
• Any SEC registered Investment Adviser.

TESTING THE WATERS COMMUNICATIONS
• Must be made by the issuer or a person authorized to act on its behalf;
• Cannot solicit firm orders or binding commitments --Non-binding indications of
interest are permitted;
• Information must be consistent with the registration statement when filed, and
SEC may request submission of testing the waters materials; and
• Antifraud provisions are fully applicable.

RESEARCH REPORTS
(Securities Act §2(a)(3))
• The definition of an “offer” to purchase or sell a security excludes research
reports published or distributed by a broker-dealer “about an emerging growth
company that is the subject of a proposed public offering . . . pursuant to a
registration statement that the issuer proposes to file, or has filed, or that is
effective” (Emphasis added)
• “Research report” includes “written, electronic, or oral communication that
includes information, opinions, or recommendations with respect to securities of
an issuer or an analysis of a security or an issuer, whether or not it provides
information reasonably sufficient upon which to base an investment decision

TESTING THE WATERS AS IPO “PRICING
DISCOVERY”
Testing the waters may be undertaken by EGCs and their “authorized
representatives.”
Consider:
• Primary shareholders;
• Private equity firms; and
• Underwriters.
Conducting pricing discussions and timing of a potential offering. Also, after
filing a registration statement, EGCs and authorized representatives may
continue to meet with investors to continue “pricing discovery.”

TESTING THE WATERS COMMON SENSE
PRECAUTIONS
• Dissemination of testing the waters communications must be limited to
QIBs and institutional accredited investors. (Confidentiality Agreements?)
• Any communication made to others or making their way into the hands of
unqualified investors or the public at large will result in a “gun jumping”
violation of section 5 of the Securities Act of 1933.
• Reasonable precautions should be taken to ensure that testing the waters
communications are not broadcast or otherwise transmitted in any way
making them susceptible to broader dissemination or retransmission, e.g.,
investor participants in meetings with authorized representatives should not
be permitted to retain materials.

REGISTRATION STATEMENT CONFIDENTIAL
SUBMISSION
Securities Act of 1933, Section 6(e)(1):
Any emerging growth company, prior to its initial public offering date, may
confidentially submit a draft registration statement, for confidential non-public review
by the staff of the Commission prior to public filing a draft registration statement,
provided that the initial confidential submission and all amendments thereto shall be
publicly filed with the Commission not later than 15 days before the date on which the
issuer conducts a road show….

A CAVEAT ON DRAFT SUBMISSIONS
Confidentially submitted registration statements are expected to be substantially
complete. However, an EGC may omit from its draft registration statements
interim financial information that relates to a historical period that the issuer
reasonably believes will not be required to be included at the time of the
contemplated offering, including interim financial information it reasonably
believes will not be required to be separately presented at the time of the
contemplated offering (Corp. Fin. CDI, Aug. 17, 2017).

SCALED DISCLOSURE ACCOMMODATIONS
FOR EGC PUBLIC OFFERINGS
• Need only present 2 years of audited financial statements.
• Not required to comply with any new or revised financial accounting
standard until such date that a private company is required to comply with
such new or revised accounting standard.
• No compensation discussion and analysis section and compensation
disclosure for only three named executive officers is required in the IPO
registration statement required.
• Management’s Discussion and Analysis (MD&A) of Financial Condition
and Results of Operations disclosures need only correspond only to the
financial statements included in its IPO registration statement.

BEING AN EMERGING GROWTH
COMPANY
During the period in which it is an EGC, the issuer:
• Is exempt from several Dodd-Frank mandated provisions for executive
compensation related disclosures, and as to others may comply with reduced
disclosure requirements generally available to smaller reporting companies;
• Is excused from SOX requirement for an auditor attestation on management
assessment of internal controls; and
• Is excused from compliance with new or revised accounting standards until such
standards apply to private companies (unless the issuer opts-out), as well as any
rule on mandatory auditor rotation

TWO POINTS TO KEEP IN MIND
✓ EGC status is an election that must be made at the time the qualifying
issuer files its registration statement (Form S-1 check the box).
✓ An EGC may choose not to rely on the JOBS Act accommodations.
However, if it chooses to comply with new or revised accounting standards
to the same extent a non-EGC issuers, it must comply with all such
standards and may not selectively opt-in or opt-out.

THE JOBS ACT IMPACT ON THE IPO
MARKET?
✓ As noted earlier, EGCs now dominate the IPO market.
✓ EGCs are concentrated in the health care, technology, financial services,
real estate, and oil and gas industries.
✓ Based on indications, the 2018 IPO market is robust. Per the Washington
Post, the first quarter for 2018 was the best for IPOs since 2015.
✓ But reports indicate the trend since the financial crisis of successful
companies remaining private longer and continuing to benefit from
attractive valuations in private financing rounds without facing burdens
associated with becoming SEC reporting companies has continued.

ABOUT THE FACULTY
ROBERT RAPP
rnr@case.edu
Robert N. Rapp is Visiting Assistant Professor of Law at the Case Western Reserve University School of
Law, where he teaches Securities Regulation, Advanced Securities Regulation and Law, Theory and Practice
in Financial Markets. He is a Retired Partner (1975-2017) in the Securities and Capital Markets Practice of
Calfee, Halter & Griswold LLP Cleveland, Ohio. He was previously Distinguished Practitioner in Residence
at the Cornell Law School. Bob’s contributions to legal scholarship include numerous published articles and
papers addressing securities and financial market regulatory topics, many of which have been cited by state
and federal courts, including the United States Supreme Court. He is the author of Blue Sky Regulation
(LexisNexis/Matthew Bender), a definitive four-volume treatise on state securities regulation in the United
States. A graduate of Case Western Reserve University (B.A., 1969) and the Case Western Reserve
University School of Law (J.D., 1972), Bob also holds a Masters of Business Administration from the
Cleveland State University Ahuja College of Business (1989).
31© 2018 by DailyDAC, LLC d/b/a Financial Poise Webinars™

JILLIAN SIDOTI
jillian@crowdfundinglawyers.net
Jillian Sidoti is one of the country’s leading experts on Regulation A+. Since 2008, Jillian has submitted multiple Regulation A Offering
Circulars to the Securities Exchange Commission for approval making her one of the few attorneys familiar with the law prior to the
changes under the JOBS Act. Since the JOBS Act, Jillian has assisted multiple companies and entrepreneurs realize their fundraising
goals through Crowdfunding, 506©, and Regulation A. Jillian also continues to specialize in transactional legal matters such as private
placement memorandums, S-1′s/S-11’s, and Regulation D filings. Jillian also spends her time speaking at seminars educating real estate
investors on how to legally raise capital for their real estate investment projects. Jillian is the author of the highly rated book, The
Crowdfunding Myth which debunks the multiple myths surrounding crowdfunding and teaches the reader how to effectively crowdfund
their securities offering.
Prior to her legal career, Jillian owned and operated a record label enabling her to tour worldwide with artists, including visiting South
Africa, Canada, Europe, and the United States. Using that experience, Jillian has been commissioned to write articles and contracts for
many music industry entities.
For several years, Jillian taught Finance and Accounting for the BS and MBA programs at the University of Redlands, drawing on her
experience as Financial Analyst, Controller, and CFO for many companies from manufacturing to real estate development. Jillian also
teaches a Small Business Management class where students are taught the anatomy of a business plan.

ABOUT THE FACULTY
KRISTOFER K. SPREEN
kspreen@calfee.com
Kris is a Partner in the Securities and Capital Markets Practice of Calfee, Halter & Griswold LLP, Cleveland,
Ohio. He practices corporate and securities law, and advises both public and private companies in connection
with a broad range of matters, including initial public offerings, follow-on offerings, private offerings, Rule 144A
private offerings, as well as cash and stock mergers and acquisitions. He regularly represents investment banks in
connection with capital markets transactions, fairness opinions and other engagements. Kris also counsels start-
up companies and venture capital firms in venture capital financings.
Kris is a frequent speaker on securities law and corporate governance topics at regional and national continuing
legal education seminars, including panels hosted by TheCorporateCounsel.net, the RR Donnelly SEC Hot
Topics Institute, and KPMG LLP’s Audit Committee Institute. He also is a member of the Board of Advisors of
TheCorporateCounsel.net and has authored articles published in Deal Lawyers and The Tax Lawyer. He is a
graduate of the Georgetown Law Center (J.D., 1999) and the University of Washington (B.A., 1996).

The material in this presentation is for general educational purposes only. It has been
prepared primarily for attorneys and accountants for use in the pursuit of their
continuing legal education and continuing professional education.
While Financial Poise is happy to make this PowerPoint freely available to all, the
reader is cautioned that it was created for use as part of a webinar that featured an
extensive verbal discussion of the topics addressed in the PowerPoint. It was not
designed to be read by itself. Financial Poise webinars can be purchased
at www.financialpoise.com. You may also receive offers for free webinars by
subscribing to Financial Poise's DACyak, a free weekly newsletter.
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DailyDAC LLC, d/b/a Financial Poise™ provides continuing education to
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Impact of the JOBS Act on the IPO Market (Series: THE JOBS ACT - A RETROSPECTIVE & A LOOK AHEAD 2018)

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