HR3395-119

What This Bill Does

The Middle Market IPO Cost Act directs the Comptroller General to study the costs small and medium-sized companies face when undertaking initial public offerings. GAO must consult with the Securities and Exchange Commission and the Financial Industry Regulatory Authority. The study must consider direct and indirect IPO costs, including accountant fees, underwriter fees, outside-adviser fees, federal securities-law compliance, state securities-law compliance, and other IPO-related costs. GAO must compare IPO costs with alternative financing and liquidity options, analyze the impact of IPO costs on capital formation, and examine how those costs affect the availability of small and medium-sized public securities to retail investors. It also must review IPO trends over a period GAO chooses, including pricing practices, the number of IPOs, evolving costs for underwriters and investment advisers, the number of brokers and dealers active in underwriting, underwriter services before and after IPOs, research availability for smaller companies, and litigation costs of being public. GAO must report findings, determinations, and any administrative or legislative recommendations within 360 days.

Who Benefits and How

Small companies considering IPOs, medium-sized companies considering IPOs, retail investors seeking access to smaller public companies, capital-formation policymakers, House Financial Services Committee staff, Senate Banking Committee staff, IPO advisers, regional broker-dealers, and investment research providers benefit because the study could identify cost barriers, pricing practices, research gaps, litigation costs, and policy changes that make public offerings more feasible for middle-market issuers.

Who Bears the Burden and How

The Government Accountability Office, GAO financial-markets analysts, Securities and Exchange Commission staff, FINRA staff, investment banks underwriting IPOs, accounting firms serving IPO issuers, law firms advising issuers, brokers active in underwriting, and public-company litigation stakeholders bear burdens because they must supply data, support consultation, have fees and practices scrutinized, and respond to possible recommendations on IPO cost, research, pricing, and litigation reforms.

Key Provisions

• Requires GAO to study direct and indirect IPO costs for small and medium-sized companies.
• Requires consultation with the Securities and Exchange Commission and FINRA.
• Requires comparison of IPO costs with alternative financing and liquidity options.
• Requires analysis of capital-formation effects and retail-investor access to smaller-company public securities.
• Requires review of IPO pricing, underwriter activity, advisory costs, research availability, and public-company litigation costs.
• Requires a congressional report with findings and recommendations within 360 days.