Understanding IPOs – What is an “emerging growth company” or “EGC”? – (6)

proceeds of the IPO, subject to shareholder approval.
Business development companies (“BDCs”) are entities that go public to fill the perceived need for capital for smaller businesses.
What is an “emerging growth company” or “EGC”?
The JOBS Act establishes a new process and disclosures for IPOs by a new class of companies referred to as
“emerging growth companies” or “EGCs.” An EGC is an issuer (including a foreign private issuer) with total annual gross revenues of less than $1 billion (subject to inflationary adjustment by the SEC every five years) during its most recently completed fiscal year.The SEC Staff has stated in its General Applicability FAQs thatasset-backed issuers and registered investment companies do not qualify as EGCs; however, BDCs can qualify as EGCs.
How long can an issuer maintain EGC status?
Status as an EGC is maintained until the earliest of:
the last day of the fiscal year in which the issuer’s total annual gross revenues are $1 billion or more;
In its Frequently Asked Questions of General Applicability on Title I of the JOBS Act (issued on April 16, 2012, updated on May 3, 2012 and September 28, 2012, and collectively referred to herein as the “General Applicability FAQs”), the SEC Staff specified that the phrase “total annual gross revenues” means total revenues of the issuer (or a predecessor of the issuer, if the predecessor’s financial statements are presented in the registration statement for the most recent fiscal year), as presented on the income statement in accordance with U.S. generally accepted accounting principles (“GAAP”). If a foreign private issuer is using International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) as its basis for presentation, then the
IFRS revenue number is used for this test. Because an issuer must determine its EGC status based on revenues as expressed in U.S. dollars, the SEC Staff indicates that a foreign private issuer’s conversion of revenues should be based on the exchange rate as of the last day of the fiscal year.

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