BIO Praises Passage of Small Cap Liquidity Reform Act.February 20, 2014 -
BIO applauded House of Representatives for passing Small Cap Liquidity Reform Act (H.R. 3448), which builds on JOBS Act by increasing liquidity for emerging growth companies that trade on public market. Citing how said act will let companies choose appropriate tick size for their trading needs "and stimulate capital formation for breakthrough research," BIO's Jim Greenwood noted how legislation will accelerate development of cures and treatments for devastating and debilitating diseases.
BIO Praises House of Representatives for Passing Small Cap Liquidity Reform Act
Biotechnology Industry Organization
1201 Maryland Ave., SW, Ste. 900
Washington, DC, 20024
Press release date: February 12, 2014
Bill would spur capital formation for small public companies
WASHINGTON--The Biotechnology Industry Organization (BIO) today applauds the House of Representatives for passing the Small Cap Liquidity Reform Act (H.R. 3448), co-sponsored by Reps. Sean Duffy (R-WI) and John Carney (D-DE). This bill builds on the success of the Jumpstart Our Business Startups (JOBS) Act by increasing liquidity for emerging growth companies, including biotech innovators, that trade on the public market.
“Small innovative businesses face a daily struggle to maintain liquidity on the public market, and this Act will allow companies to choose the tick size that best fits their trading needs and stimulate capital formation for breakthrough research.”
Under current U.S. Securities and Exchange Commission (SEC) rules, all securities on the public market are priced in $0.01 increments. This minimum trading increment is known as the “tick size.” The switch to the standard tick size of a penny was enacted in 2000 in order to boost trading in large company stocks, but many smaller issuers have experienced the opposite effect.
The Small Cap Liquidity Reform Act institutes a pilot program that will allow small issuers to choose larger trading increments (either $0.05 or $0.10) in order to spur trading activity in their stock.
Jim Greenwood, BIO’s President and CEO, made the following statement:
“This legislation recognizes the unique nature of the trading environment that small companies face as well as the high capital burden of biotech R&D.
“Growing biotech companies often turn to the public market to access the large sums of capital necessary to fund expensive clinical trials. However, a stagnant market bereft of liquidity does nothing to spur capital formation or fund research.
“The current one-size-fits-all tick size does not reflect the realities of the market and subjects smaller issuers to the same trading framework as large, multinational companies with exponentially higher trading volumes and market caps.
“Small innovative businesses face a daily struggle to maintain liquidity on the public market, and this Act will allow companies to choose the tick size that best fits their trading needs and stimulate capital formation for breakthrough research.
“BIO thanks Rep. Duffy and Rep. Carney for introducing this important legislation as it will increase the effectiveness of the public market as a capital formation tool and speed the development of cures and treatments for the most devastating and debilitating diseases.”
The JOBS Act has been successful in stimulating IPO activity for biotech small businesses. Since its passage, more than 60 biotech companies have gone public using the IPO On-Ramp. Once on the public market, these companies depend on strong liquidity to help raise the capital necessary to fund the decade-long, billion-dollar development timeline intrinsic to groundbreaking R&D.
For more information on issues affecting emerging biotech companies, please visit http://www.bio.org/ecs
BIO is the world's largest trade association representing biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States and in more than 30 other nations. BIO members are involved in the research and development of innovative healthcare, agricultural, industrial and environmental biotechnology products. BIO also produces the BIO International Convention, the world’s largest gathering of the biotechnology industry, along with industry-leading investor and partnering meetings held around the world. BIOtechNOW is BIO's blog chronicling “innovations transforming our world” and the BIO Newsletter is the organization’s bi-weekly email newsletter.” Subscribe to the BIO Newsletter.
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