Sen. John Kennedy, a Louisiana Republican, on October 28, 2021, introduced legislation that would facilitate the creation of venture exchanges. Lawmakers have sought for years to advance the bill, the Main Street Growth Act, which would provide an alternate trading venue for securities of small companies that aren’t ready to debut on national stock exchanges.
“The Main Street Growth Act would give smaller companies the option of listing on their own specialized exchanges, where they would be more visible to investors,” Kennedy said in a statement. “These exchanges would promote growth in America’s economy by better meeting the needs of small business owners, their employees and investors,”
Under Kennedy’s bill (S. 3097), the exchanges would list “venture securities.” The measure defines venture securities as those of an unregistered “early-stage growth company” with a public float of less than $700 million, or an emerging growth company (EGC) under the JOBS Act of 2012.Sec. 1 of pl112-106
The JOBS Act provides EGCs with a number of disclosure and accounting benefits. To qualify, a company must have less than about $1 billion in annual revenue and be within five years of their initial public offering, among other criteria.
Also eligible to trade on the venture exchanges would be registered securities with a public float of less than $700 million or a daily trading volume of 75,000 shares or less.
Venture exchanges would provide a lightly regulated trading venue for companies that aren’t ready to handle the requirements that accompany listing on a national exchange such New York Stock Exchange or the NASDAQ Stock Market, but who still want to access the public markets.
The exchanges have so far failed to thrive in the U.S.
Skeptics have pointed to the mid-1990s collapse of the American Stock Exchange’s Emerging Company Marketplace, which struggled to attract new listings following its launch and was bogged down with scandals among companies that raised questions over the exchange’s screening processes, among other problems.
The Main Street Growth Act also encourages the SEC, if appropriate, to establish the Office of Venture Exchanges within the Division of Trading and Markets.
This article originally appeared in the November 1, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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