Wednesday, April 4, 2012

JOBS Act raises money, raises risk for IR pros

Posted by Joe Hassett
THE JOBS ACT: Good for crooks or good for you?
Today's topic on GThink: "JOBS Act Jeopardizes Safety Net for Investors," covered by The New York Times.

Abstract: On Thursday, President Obama will sign into law the Jumpstart Our Business Startups (JOBS) Act that is intended to help startups raise money and go public. However, Andrew Sorkin at The New York Times thinks the legislation does not go far enough to protect would-be investors from fraudulent startups. He points to Groupon's recent IPO, which saw success on its opening day, but has since slumped as the company revised its revenue numbers and failed to prove how they create value.

The takeaway: Over the past two decades, we’ve seen a fragmentation of the traditional investor market for startups. This ranges from large, professional investment firms to angel investor groups, and now to the man-on-the-street investor, as proposed in the JOBS Act. This is both good and bad for investor relations professionals. We find ourselves faced with a tremendous new audience looking for interesting investment stories, but who might have limited investment experience. As IR professionals, it’s our job to find ways to communicate with these individuals. Done with full disclosure and transparency, you’ll establish trust and credibility, which would provide some of the protection Mr. Sorkin rails about. The challenge: How do we do that? It’s a question that IR continues to wrestle with in this age of social media and, now, crowd funding investments and investors.

That's what G thinks. What do you think?
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