In March 2017, the Public Company Accounting Oversight Board, or PCAOB, released a white paper detailing certain characteristics and trends of emerging growth companies, or EGCs, based on its review of available data through November 15, 2016. The White Paper highlights the following notable trends:
- A Sizeable Number of Companies Identified Themselves as an EGC. There were 1,951 companies that identified themselves as EGCs in at least one SEC filing since 2012. This number excludes companies that were EGCs and since have transitioned and become large accelerated filers. As of November 15, 2016, the 742 exchange-listed EGC filers had $350 billion in market capitalization. EGC filers represent:
- 15% of the 4,797 total companies listed on a U.S. national securities exchange; and
- approximately 1% of total market capitalization of all exchange-listed companies.
- Characteristics of EGCs. The assets reported by EGC filers ranged from zero to approximately $19.4 billion. The average assets were approximately $245.9 million, while half of EGC filers reported assets of less than $5.9 million. The annual revenue reported by EGC filers ranged from zero to approximately $978.5 million. The average revenue was approximately $56.6 million, while half of EGC filers reported revenue of less than $140,000.
- Going Concern. Approximately 51% of EGC filers included a going concern paragraph in their financial statements.
- The Majority of EGC Filers Provided a Management Report on Internal Control Over Financial Reporting. Approximately 65% of EGC filers (or 1,262 of 1,951) provided a management report on internal control over financial reporting in their most recent annual filing. Almost half (approximately 47%) of those EGC filers reported material weaknesses.
A copy of the White Paper is available here: http://business.cch.com/srd/PCAOBWhitePaperEGCs.pdf