August 21, 2007
In Proposed Release 33-8812, the Commission proposes to broaden the number of companies that are eligible to take advantage of Form S-3 and F-3. The subject proposal discusses and highlights: (i) various efficiencies associated with the Form (ii) that the reporting obligations of these smaller companies are comparable to those of larger companies and that (iii) it is good to "enhance" these issuers access to the public securities markets.
The proposal has been written to specifically exclude "Shell Companies." I believe that the Commission should reconsider the "shell companies" exclusion.
I focus on the fact that the disclosure and regulatory burden on small companies – including shell companies – is comparable to those of the largest public companies.
I question why SPACs – with no specific operations – are allowed to raise and register securities for what will likely be a larger venture and why a similar availability is not allowed for smaller ventures.
Competing markets have had the foresight to make such schemes available in their respective markets. The extremely successful TSX Venture Exchange Capital Pool Company Program is one example.
I believe that making Form S-3 available, with perhaps special exceptions in terms of the maximum amount of capital raised and the length of time of the registration, to shell companies will democratize the concept of the SPAC and make the same type of SPAC structure available to smaller ventures.
I believe that my point is buttressed by the good decision to attempt to end an issuers ability to make Regulation D Rule 504 stock tradable under a state exemption.
In effect, allowing for a minimum amount of capital to be raised and registered by ALL companies will (i) encourage more companies to enter the disclosure system, and (ii) equally as important, it will encourage (a) new ventures – of all sizes – to happen, and (b) risk takers to make investments in those ventures.