Friday, December 14, 2007

Restricted securities get a little less restricted

From Financial Week:

With debt markets still dicey, SEC’s shift on resales could fill a void by helping companies access capital
Companies could have an easier time raising capital in the restricted securities market after a Securities and Exchange Commission ruling goes into effect next month. The SEC recently voted unanimously to change rules regarding the resale of restricted securities, which are issued through a private placement by companies seeking to raise capital. Previously, investors in such securities had to hold them for one year, but the commission shortened that period to six months, which should help companies reduce their cost of capital and increase their access to capital.

“The revisions to Rule 144 should make it more efficient for companies of all sizes to access the private markets,” John W. White, director of the SEC’s division of corporation finance, said in a statement. “In the coming months, we expect to recommend that the commission finalize additional rules that will further promote capital formation by smaller companies.”

The implications of the rule change will be far-reaching, said Stephen Bruel, an analyst at Tower Group. “Investors will be more willing to purchase those securities, so there will be more liquidity, and therefore, more opportunities for issuance.”