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The Impact of the JOBS Act

Last week we shared some thoughts on the dominance of healthcare IPOs in the first half of 2014, and we speculated on some of the reasons behind it.

One of the things we mentioned was the influence of the 2012 JOBS act: “Or maybe the fact that the April 2012 JOBS (Jumpstart Our Business Startups) act has made it affordable for smaller companies to go public, thanks to confidential filings and lower legal/regulatory costs.”

Here we are in August and Healthcare IPOs haven’t slowed down, so let’s take a closer look at the JOBS act and why it’s having such an impact, and not just on healthcare.

The JOBS Act aims to assist “emerging growth companies” (EGCs) by reducing the costs and risks associated with initial public offerings. Since the signing of the JOBS Act in April 2012, 461 IPOs have been classified as EGCs and of those, 383 have gone public, accounting for more than three-fourths of the 476 IPOs to price during this period (as of early-Aug 2014).

And Healthcare has been the primary beneficiary of the new policy.

Since 2013, 319 EGC IPOs have priced on US exchanges, compared to just 68 non-EGCs, and of the 121 Healthcare IPOs to price during this time, 113 were EGCs, the most out of any sector (see graph). Technology logged the second highest EGC deal count, at 67, trailing Healthcare by a wide margin.

Of course, as we alluded in our earlier blog post, Healthcare’s strong performance is not merely a result of government policy; the IPO market has been performing very well in general in 2014 – we recently saw the the strongest week since 2004. But there’s no doubt that the JOBS act has played, and continues to play, a major role in 2014’s steady stream of Healthcare healthcare deals.

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