PhillyDeals: Private firms cheered by relaxed reporting law
Who wants to know?
Wawa Inc.'s chief executive-elect, Christopher T. Gheysens, will join U.S. Sen. Tom Carper (D., Del.) at a Wawa just below the Pennsylvania state line Tuesday to celebrate President Obama's planned signing of a law that makes it easier for private firms like the Delaware County-based convenience-store chain to stay exempt from government financial rules that apply to public companies.
The owners of Wawa, Gore-Tex maker W.L. Gore & Co., Wegmans Food Markets and other private firms are cheering the JOBS Act, which, despite its name, isn't a labor-hiring program, but a package of bills cutting what sponsors call onerous business regulations, some of which were designed to protect investors from rip-offs following the Enron scandal of the early 2000s.
Sens. Pat Toomey (R., Pa.) and Carper joined to sponsor one bill in the package, the "Private Company Flexibility and Growth Act", which would lift the current limit on how many shareholders a company has to have, to 2,000, from today's 500, before it must report detailed financial data to the public and the Securities and Exchange Commission.
The 600-store Wawa chain, controlled by descendants of its founding Wood family such as ex-Delaware First Lady Elise Wood du Pont, joined family-owned, Newark, Del.-based Gore and Rochester-based Wegmans to hire ex-U.S. Rep. Thomas Reynolds (R., N.Y.) to lobby for the bill last year.
Gheysens, an accountant by training who is scheduled to take over as Wawa boss when Howard Stoeckel retires at the end of this year, told a Senate hearing last fall that private companies like Wawa "can focus on long-term results," like expanding in Florida, instead of cutting short-term costs to satisfy "Wall Street" expectations.
Under current law, as the number of its private shareholders grows, Wawa would someday "be required to choose between becoming a public reporting company" or spending "as much as $40 million" on a reorganization to avoid having to go public, he testified.
Gheysens told me Wawa already tells shareholders and members of its employee stock options program its annual sales, profits, compensation, and owner dividends; it doesn't want to have to pay for additional quarterly accounting, certification, and compliance.
Similarly, Gore says it wants to be classed as a private company so it can avoid pressure from outside investors, spokesman Michael Ratchford told me. Sen. Chris Coons (D., Del.), a former Gore lawyer and lobbyist and a stepson of Gore cofounder Robert Gore, signed on as one of the bill's cosponsors.
Coons was lead sponsor for a separate part of the JOBS package to exempt companies less than five years old, or with sales under $250 million, from having to hire outside financial-control auditors, submit executive pay to an investor vote, or comply with full terms of the Sarbanes-Oxley antifraud compliance certification law. The limit was later raised to $1 billion, exempting larger companies, in a final version sponsored by Carper, Toomey and U.S. Rep. John Carney (D., Del.), among others.
Toomey's office named Phil Bell, CEO at Electro-Petroleum, Wayne; Todd Wallach, CEO of Molecular Detection, also in Wayne; and Jeff Hatfield, CEO of Vitae Pharmaceuticals, Fort Washington, among the bill's backers who may gain if they can go public with reduced reporting costs.
Compliance magazine editorializes that the JOBS Act, which passed with wide bipartisan support, "does almost nothing to help small business" (it doesn't cut health care costs, repair roads, or boost the supply of skilled workers), but will prove profitable for "Wall Street" bankers who take companies public and finance political campaigns.
Coons backed the SarbOx rollback at the suggestion of Delaware's corporate bar and Delaware Secretary of State Jeffrey Bullock because it would likely increase the number of initial public stock offerings, which mean more business for the state in its role as a corporate legal center, Coons spokesman Ian Koski told me.
Doesn't that contradict the thrust of the private-companies bill, which, as Wawa's Gheysens testified, reduces pressure to go public?
"Different companies need different things," Carper spokeswoman Emily Spain told me.
And Congress is there to help, this election year.
Contact Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com, or follow on Twitter @PhillyJoeD.