[Congressional Record Volume 171, Number 124 (Monday, July 21, 2025)]
[House]
[Pages H3511-H3513]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MIDDLE MARKET IPO COST ACT
Mr. HILL of Arkansas. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 3395) to require the Comptroller General of the
United States to carry out a study of the costs associated with small-
and medium-sized companies to undertake initial public offerings, as
amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 3395
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Middle Market IPO Cost
Act''.
SEC. 2. STUDY ON IPO FEES.
(a) Study.--The Comptroller General of the United States,
in consultation with the Securities and Exchange Commission
and the Financial Industry Regulatory Authority, shall carry
out a study of the costs associated with small- and medium-
sized companies to undertake initial public offerings
(``IPOs''). In carrying out such study, the Comptroller
General shall--
(1) consider the direct and indirect costs of an IPO,
including--
(A) fees of accountants, underwriters, and any other
outside advisors with respect to the IPO;
(B) compliance with Federal and State securities laws at
the time of the IPO; and
(C) such other IPO-related costs as the Comptroller General
may consider;
(2) compare and analyze the costs of an IPO with the costs
of obtaining alternative sources of financing and of
liquidity;
(3) consider the impact of such costs on capital formation;
(4) analyze the impact of these costs on the availability
of public securities of small- and medium-sized companies to
retail investors; and
[[Page H3512]]
(5) analyze trends in IPOs over a time period the
Comptroller General determines is appropriate to analyze IPO
pricing practices, considering--
(A) the number of IPOs;
(B) how costs for IPOs have evolved over time for
underwriters, investment advisory firms, and other
professions for services in connection with an IPO;
(C) the number of brokers and dealers active in
underwriting IPOs;
(D) the different types of services that underwriters and
related persons provide before and after a small- or medium-
sized company IPO and the factors impacting IPOs costs;
(E) changes in the costs and availability of investment
research for small- and medium-sized companies; and
(F) the impacts of litigation and its costs on being a
public company.
(b) Report.--Not later than the end of the 360-day period
beginning on the date of the enactment of this Act, the
Comptroller General of the United States shall issue a report
to the Congress containing all findings and determinations
made in carrying out the study required under subsection (a)
and any administrative or legislative recommendations the
Comptroller General may have.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Arkansas (Mr. Hill) and the gentlewoman from California (Ms. Waters)
each will control 20 minutes.
The Chair recognizes the gentleman from Arkansas.
General Leave
Mr. HILL of Arkansas. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days in which to revise and extend their
remarks and include extraneous material on this bill.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Arkansas?
There was no objection.
Mr. HILL of Arkansas. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise in support of H.R. 3395, the Middle Market IPO
Cost Act. Currently, companies have two options for raising capital: an
initial public offering, an IPO, or a private offering. Fewer companies
are choosing to take the IPO path because of the up-front costs of
going public, as well as the high operating costs public companies
experience due to SEC reporting rules.
Before a company files for an IPO, they often spend tens of millions
of dollars to gather and compile information to submit to the SEC.
These mandatory information requirements exclude or dissuade many
companies from even considering an initial public offering.
The study required by Mr. Himes' bill will help Congress and the
market better understand the costs associated with small- and medium-
sized companies going public through the IPO process.
I urge all my colleagues to join me in supporting this bill, and I
reserve the balance of my time.
Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this bill requires the SEC to study the costs
encountered by small- and medium-sized companies when undertaking the
initial public offering of their securities to the public, otherwise
known as IPO, as well as certain other offerings that are exempt from
SEC registration.
When going public, companies tend to hire underwriters, like
investment banks, and other professionals, like attorneys and
accountants, to help prepare the IPO. Underwriters serving as
intermediaries between companies and prospective investors typically
receive a set percentage of the IPO price as compensation for their
work.
Large companies have in recent years been able to negotiate lower
percentages for this process, which reduces their overall fee. At the
same time, smaller companies have continued to pay the same historic
percentage for this service.
Simply put, this bill sheds light on how much small- and medium-sized
companies are paying for their underwriting fees, which will allow
these companies to negotiate lower prices.
Mr. Speaker, I urge all of my colleagues to support my friend from
Connecticut (Mr. Himes) commonsense measure. I reserve the balance of
my time.
Mr. HILL of Arkansas. Mr. Speaker, I include in the Record the CBO
estimate for this bill.
H.R. 3395, MIDDLE MARKET IPO COST ACT, AS REPORTED BY THE HOUSE
COMMITTEE ON FINANCIAL SERVICES ON JUNE 3, 2025
------------------------------------------------------------------------
By fiscal year, millions of
dollars--
-------------------------------
2025 2025-2030 2025-2035
------------------------------------------------------------------------
Direct Spending (Outlays)............... 0 0 0
Revenues................................ 0 0 0
Increase or Decrease (-) in the Deficit. 0 0 0
Spending Subject to Appropriation * 1 **
(Outlays)..............................
------------------------------------------------------------------------
* = between zero and $500,000.
** = not estimated.
Increases net direct spending in any of the four
consecutive 10-year periods beginning in 2036? No.
Increases on-budget deficits in any of the four consecutive
10-year periods beginning in 2036? No.
Statutory pay-as-you-go procedures apply? No.
Mandate Effects:
Contains intergovernmental mandate? No.
Contains private-sector mandate? No.
H.R. 3395 would require the Government Accountability
Office (GAO), in consultation with the Securities and
Exchange Commission and the Financial Industry Regulatory
Authority, to study and report to the Congress within one
year of enactment on the costs small- and medium-sized
companies incur when conducting initial public offerings
(IPOs). An IPO is a process where a private company offers
shares to the public for the first time, making it a publicly
traded company.
Based on the cost of similar activities, CBO estimates that
implementing H.R. 3395 would cost $l million over the 2025-
2026 period. Any related spending would be subject to the
availability of appropriated funds.
The CBO staff contact for this estimate is Matthew
Pickford. The estimate was reviewed by H. Samuel Papenfbss,
Deputy Director of Budget Analysis.
Phillip L. Swagel,
Director, Congressional Budget Office.
Mr. HILL of Arkansas. Mr. Speaker, I reserve the balance of my time.
Ms. WATERS. Mr. Speaker, I yield 3 minutes to the gentleman from
Connecticut (Mr. Himes), the ranking member of the Permanent Select
Committee on Intelligence and the sponsor of this bill.
Mr. HIMES. Mr. Speaker, I offer a big thank you to the gentlewoman
from California (Ms. Waters), the ranking member, and to the gentleman
from Arkansas (Mr. Hill), my good friend, for their support of this
bill.
I just want to elaborate for a minute on what I think the need is for
this bill. This grew out of the work we did many, many years ago on the
JOBS Act, in which we observed that the regulatory expenses faced by a
company seeking to go public were roughly $2 million to $4 million in
size.
It is also true that a small IPO, a medium-sized IPO, anything up to
about $200 million, is subject almost always to a 7 percent gross
spread. That is 7 percent of the proceeds, or in the case of a $200
million offering, $14 million. On a $150 million offering, it is $10
million, well more than twice the regulatory cost that we identified in
working on the JOBS Act.
What is very strange about that 7 percent fee is that, regardless of
what period of time you examine, IPOs from about $30 million up to
about $200 million are always subject to a 7 percent fee. Now, all of
us who observe markets know that that is odd behavior in what should be
a competitive market.
This is money, of course, that goes to the investment banks that
underwrite these IPOs. I know this because I spent many years working
in those investment banks.
The bill here simply says, having done the work that we did on the
JOBS Act, what can we do to examine the underlying market forces or
nonmarket forces creating this 7 percent gross spread and costs of
many, many millions of dollars for companies when they are small and
capital is at a premium.
This study, I think, would illustrate some things that would allow us
to do even better than we did in the JOBS Act and make it that much
more possible, maybe even probable for companies to seek capital in our
public markets.
Mr. Speaker, I thank once again the chairman and the ranking member
of the committee for their support.
Ms. WATERS. Mr. Speaker, I yield myself the balance of my time to
close.
I support Mr. Himes' bill, which will shed light on how much small-
and medium-sized companies are paying for their underwriting fees to go
public. I hope it will finally put pressure on the SEC to address this
important issue for smaller companies.
Mr. Speaker, I again urge my colleagues to support this bill, and I
yield back the balance of my time.
Mr. HILL of Arkansas. Mr. Speaker, I urge a ``yes'' vote from both
sides of
[[Page H3513]]
the aisle, and I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Arkansas (Mr. Hill) that the House suspend the rules and
pass the bill, H.R. 3395, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
____________________