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Accounting rules, IPO readiness, and Crowdfunding

24 Sep

Rhodes Holdings LLC has had a strong relationship with Clear Financial Solutions, Inc. and its principal, Steven Plumb.  This is their Fall 2012 newsletter, which I believe is worthwhile for public company management members…


New SEC Resource Extraction Issuer Rules

On August 22, 2012, the United States Securities and Exchange Commission (SEC) adopted final rules requiring annual disclosure of payments made to foreign governments and the U.S. federal government by “resource extraction issuers.”  These new disclosure requirements apply to all cash or in-kind payments made to foreign governments or the U.S. federal government by Exchange Act reporting oil, natural gas, and mining companies, domestic and foreign, in connection with the commercial development of oil, natural gas, or minerals.  The rules require disclosure to be made in an annual Form SD to be filed with the SEC not more than 150 days following the end of each fiscal year ending after September 30, 2013.  For resource extraction issuers with a calendar year end, the first filing will be due on May 30, 2014.

These rules fulfill a mandate in the Dodd-Frank Wall Street Reform and Consumer Protection Act to further the objectives of the Extractive Industries Transparency Initiative.  These rules can have a far reaching impact on the competitiveness of extractive industry companies and should be evaluated by all domestic and foreign companies, including smaller reporting companies, that are required to file annual reports with the SEC and are engaged in the commercial development of oil, natural gas, or minerals.

We suggest that you begin analyzing the rules and developing strategies to gather information and track contracts, payments and related expenditures.

You can read the SEC press release here.

Crowd Funding

There’s been a recent development that may shift a few paradigms in the world of finance called “crowd funding.”  Crowd funding is simply the raising of funds from many people rather than a few large investors.  This is usually done using the internet due to the ease of communication and transfer of funds.  With the passing of the Jumpstart Our Business Startups Act (JOBS Act) in April, crowd funding has become a viable option for raising business capital.  The act allows companies to solicit and sell securities to non-accredited investors and, according to Jim Brendel of Accounting Today, increases the minimum number of total investors that requires a company to file publicly from 500 to 2,000.1

Through efficient utilization of the internet and other media, a company could fund a project with hundreds of small investments rather than looking for thousands or millions of dollars from just a few investors.  Many artists and even private individuals have already had great success with crowd funding through websites such as www.artistshare.com/v4/, www.gofundme.com, and www.kickstarter.com including a fully funded tour of by British rock group Marillion.2  This new reality drastically increases the amount and availability of investment capital as the next generation of business is funded not by Swiss bank accounts but by Mr. and Mrs. Smith’s checking account.  Sources and more on crowd funding:

  1. http://www.accountingtoday.com/news/crowdfunding-jobs-act-jim-brendel-63508-1.html
  2. http://www.music4point5.com/blog/the-marillion-story-and-what-we-can-all-learn-from-it
  3.  http://crowdfunding.pbworks.com/w/page/10402176/Crowdfunding
  4. http://en.wikipedia.org/wiki/Crowd_funding
  5. http://www.startupexemption.com/
  6. http://www.scribd.com/doc/59656556/Crowdfunding-Transforming-Customers-into-Investors-through-Innovative-Service-Platforms

IPO Readiness

Is your company considering going public or looking to be acquired by a public company?  In either situation, you should begin positioning your company to act and report as if it were a public company.  Consider the following as you move toward your goal:

  • Begin the IPO readiness process early enough so that your pre-listed company acts and operates like a public company at least a year before the IPO
  • Commit substantial resources to the IPO process and build the quality management team, robust financial and business infrastructure, corporate governance and investor relations strategy that will attract the right investors
  • Properly assess the amount of time the IPO journey will take, or the level of scrutiny and accountability faced by a public company

Consider the following facts, as reported by Ernst & Young:

  • Investors base an average of 60% of their IPO investment decisions on financial factors especially: debt to equity ratios, EPS growth, sales growth, ROE, profitability and EBITDA growth
  • Investors base an average of 40% of their IPO investment decisions on non-financial factors especially: quality of management, corporate strategy and execution, brand strength and operational effectiveness, and corporate governance
  • Articulate a compelling equity story backed up by a strong track record of growth which sets you apart from your peers while maximizing value for owners

About Us

Clear Financial Solutions, Inc. specializes providing Contract CFO and SEC Reporting Services.  We are experienced entrepreneurs with extensive public company and start up experience.  Hire the expertise and vision of seasoned financial and accounting professionals and let us help you succeed by doing more of what you do well and improving what you don’t.

Call on us today at (713) 780-0806 to schedule a free one hour confidential consultation or visit our website www.clearfinancials.com.

Steven Plumb, President


© 2012 by Clear Financial Solutions, Inc., all rights reserved. Terms of Use · Privacy Policy

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1 Comment

Posted by on September 24, 2012 in BLOG, Business, Entrepenuers, Public markets

 

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