[House Report 119-128]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-128
======================================================================
MIDDLE MARKET IPO COST ACT
_______
June 3, 2025.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 3395]
The Committee on Financial Services, to whom was referred
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, having considered the same, reports favorably
thereon with an amendment and recommends that the bill as
amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Committee Consideration.......................................... 2
Related Hearings................................................. 3
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 6
Performance Goals and Objectives................................. 6
New Budget Authority and CBO Cost Estimate....................... 6
Unfunded Mandates Statement...................................... 6
Earmark Statement................................................ 6
Federal Advisory Committee Act Statement......................... 6
Applicability to the Legislative Branch.......................... 7
Duplication of Federal Programs.................................. 7
Section-by-Section Analysis of the Legislation................... 7
Changes in Existing Law Made by the Bill, as Reported............ 7
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
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
(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.
PURPOSE AND SUMMARY
H.R. 3395, the Middle Market IPO Underwriting Cost Act, was
introduced on May 14, 2025, by Representative Jim Himes (CT-
04). The bill requires the Comptroller General, in consultation
with the Securities and Exchange Commission (SEC) and FINRA, to
study and report on the costs encountered by small- and medium-
sized companies when undertaking IPOs.
BACKGROUND AND NEED FOR LEGISLATION
When a company decides to sell its securities to the
public, it incurs various costs to comply with the requirements
to conduct the IPO, as well as to enhance the ability for the
IPO to price and market successfully. For companies undertaking
an IPO, underwriting costs average four to seven percent of
gross IPO proceeds. In 2024, gross IPO proceeds averaged $179
million, meaning that a company with an IPO grossing this
amount could have incurred more than $12 million alone in
underwriting fees. Underwriting fees represent just one of
several categories of transactional costs when undertaking an
IPO. The study required by this bill will help Congress and the
market better understand the costs facing small- and medium-
sized companies pursuing IPOs.
COMMITTEE CONSIDERATION
115TH CONGRESS
On July 10, 2018, Representative Jim Himes (D-CT)
introduced H.R. 6324, the Middle Market IPO Underwriting Cost
Act. This bill is the original iteration of H.R. 3395. The bill
was referred solely to the Committee on Financial Services. The
Committee on Financial Services and the Subcommittee on Capital
Markets, Securities, and Investment held hearings to examine
matters relating to H.R. 6324 on November 15, 2016, March 22,
2017, October 4, 2017, November 3, 2017, May 23, 2018, and June
21, 2018. On July 11, 2018, the Committee on Financial Services
ordered H.R. 6324 to be reported favorably to the House of
Representatives by a voice vote.
118TH CONGRESS
On April 25, 2023, Representative Himes introduced H.R.
2812, the Middle Market IPO Cost Act. Representative Mike
Lawler (R-NY) was added subsequently as a cosponsor. This bill
is an earlier iteration of H.R. 3395. The bill was referred
solely to the Committee on Financial Services. On April 26,
2023, the Committee on Financial Services ordered H.R. 2812 to
be reported favorably to the House of Representatives. On June
5, 2023, the House suspended the rules and passed the bill by a
recorded vote of 390-10. It was received in the Senate and
referred to the Committee on Banking, Housing, and Urban
Affairs.
119TH CONGRESS
On May 14, 2025, Representative Himes introduced H.R. 3395,
the Middle Market IPO Cost Act. Representative Pete Sessions
(R-TX) was added subsequently as a cosponsor. The bill was
referred solely to the Committee on Financial Services. The
bill was attached to the February 26, 2025, hearing titled
``The Future of American Capital: Strengthening Public and
Private Markets by Increasing Investor Access and Facilitating
Capital Formation'' and the March 25, 2025, hearing titled,
``Beyond Silicon Valley: Expanding Access to Capital Across
America.''
On May 20, 2025, the Committee met in open session to
consider, among others, H.R. 3395. The Committee favorably
reported H.R. 3395, as amended, to the House of
Representatives.
RELATED HEARINGS
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearings were used to
develop H.R. 3395:
The Capital Markets Subcommittee of the Committee on
Financial Services held a February 26, 2025, hearing titled
``The Future of American Capital: Strengthening Public and
Private Markets by Increasing Investor Access and Facilitating
Capital Formation'' and the Full Committee held a March 25,
2025, hearing titled, ``Beyond Silicon Valley: Expanding Access
to Capital Across America.'' A discussion draft version of the
bill was attached to both hearings. The following witnesses
testified at the February 26, 2025, hearing: Mr. Andrew
Barnell, CEO and Co-Founder, Geneoscopy; Mr. McKeever Conwell,
Founder and Managing Partner, RareBreed Ventures; Ms. Rebecca
Kacaba, CEO and Co-Founder, DealMaker; Ms. Anna Pinedo,
Partner, Mayer Brown; and Ms. Alexandra Thornton, Senior
Director, Financial Regulation, Center for American Progress.
The following witnesses testified at the March 25, 2025,
hearing: Mr. Steve Case, Chairman and CEO, Revolution LLC; Mr.
Bill Newell, Senior Business Advisor & Former CEO, Sutro
Biopharma; Ms. Candice Matthews Brackeen, General Partner,
Lightship Capital; Mr. Joel Trotter, Partner, Latham & Watkins
LLP; and Ms. Amanda Senn, Director of the Alabama Securities
Commission.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
On May 20, 2025, the Committee ordered H.R. 3395, as
amended, to be reported favorably to the House by a recorded
vote of 50 yeas and 0 nays, a quorum being present. (Record
Vote No. FC-105). Before the question to report was called, the
Committee adopted an amendment in the nature of a substitute,
designated HIMES_005, which made minor edits and technical
changes, offered by Representative Himes. The amendment was
adopted by voice vote, a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.R. 3395 is to help
Congress and the market better understand the costs associated
with small-and medium-sized companies to undertake IPOs and
become public companies by requiring the SEC, in consultation
with the Financial Industry Regulatory Authority, to conduct a
study.
COMMITTEE COST ESTIMATE
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 3395. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of House rule XIII, the Committee
will adopt as its own the cost estimate by the Director of the
Congressional Budget Office once it has been prepared.
NEW BUDGET AUTHORITY AND CBO COST ESTIMATE
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, a cost estimate was not made
available to the Committee in time for the filing of this
report. The Chairman of the Committee shall cause such estimate
to be printed in the Congressional Record upon its receipt by
the Committee.
UNFUNDED MANDATES STATEMENT
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Committee will adopt the estimate once
it has been prepared by the Director.
EARMARK STATEMENT
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the resolution and states that the provisions
of the bill do not contain any congressional earmarks, limited
tax benefits, or limited tariff benefits within the meaning of
the rule.
FEDERAL ADVISORY COMMITTEE ACT STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO THE LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
Section 1 provides the short title is the ``Middle Market
IPO Underwriting Cost Act.''
Section 2. Study on IPO fees
This section requires the SEC, in consultation with the
Financial Industry Regulatory Authority, to study the costs
associated with small and medium-sized companies to undertake
initial public offerings. This section states that in carrying
out such study, the SEC shall consider the direct and indirect
costs of an IPO, compare and analyze the costs of an IPO with
the costs of obtaining alternative sources of financing and of
liquidity, consider the impact of such costs on capital
formation, analyze the impact of these costs on availability of
public securities of small and medium-sized companies to retail
investors, and analyze trends in IPOs over a time period the
SEC determines appropriate to analyze IPO pricing practices. In
analyzing trends in IPOs, the SEC will consider the number of
IPOs, how costs of IPOs have evolved, the number of brokers and
dealers active in underwriting IPOs, the different types of
services that underwriters and related persons provide and the
factors impacting underwriting costs, changes in the costs and
availability of investment research, and any other
consideration the SEC deems appropriate. Finally, this section
notes that the SEC shall issue a report to Congress containing
all finding and determinations made in carrying out the study
and any administrative or legislative recommendations the SEC
may have not later than the end of the 360-day period beginning
on the date of the enactment of this Act.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 3395 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report required under clause 3(e) of rule XIII of
the House of Representatives.
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