Planning to take your company public? Be warned: Nasdaq has proposed new rules that will make it more difficult for small firms to list on its SmallCap Market.
The rules are currently under review by the Securities and Exchange Commission and are expected to be phased in starting in February.
"The changes are being made to improve the quality of companies listing, to increase safeguards protecting shareholders and to preserve firms' ability to raise capital," says Domenick Esposito, a managing partner at accounting and management consulting firm Grant Thornton in New York City and board member of Nasdaq's Listing Qualifications Committee.
According to Esposito, there are several changes that will impact small businesses' ability to list on Nasdaq. For example, firms must now meet one of the following qualifications: net tangible assets of $4 million, market capitalization of $50 million, or net income of at least $750,000 in two of the last three years. In addition, there must now be a minimum bid price of $1 (there used to be no minimum), and firms must use peer-reviewed CPA firms.
Companies wanting to be listed on the SmallCap Market must also comply with new corporate governance standards. These include having a minimum of two independent directors on your board and establishing an audit committee, a majority of whose members must not work for your company. Firms must also conduct shareholder meetings and establish a process for determining conflicts of interest.
These changes will effectively limit who can list, according to Esposito. "[Since 1991, when the Nasdaq was last changed], a number of small companies have gone public, raised capital from small investors and shortly afterward gone out of business," he says. "All of these changes mean there will be fewer companies listing than in the past, and those that do list will have been around longer and may pay considerably more attention to corporate governance."
The Big Picture
If your employees ever grumble about not having the most up-to-date equipment, the CD-ROM "Why Finance Matters!" could help them understand how financial decisions impact the company's bottom line.
Developed by executive training company Strategic Management Group Inc. (SMG) in Philadelphia, the CD-ROM explains concepts such as cash flow, balance sheets and the need to create shareholder value.
According to Clark Callahan, a senior consultant with SMG, it's crucial that employees understand financial decisions because each employee comprises a significant amount of the business's value.
Generic versions of the program cost $500; customized versions start at $20,000. You'll need a Pentium 75MHz; DOS 6.0; 8MB RAM; Windows 3.1 or higher; an 8-bit sound card; and 5MB available hard-drive space.
Bluemoney Software Corp. has developed electronic wallet software that may make it safer and simpler for small businesses to process customers' Internet purchases.
Electronic wallets, which electronically track cash, typically work with software on a server at the site of the business owner, says Michael Sullivan-Trainor, director of Internet research for IDC/Link, an information technology research firm in Framingham, Massachusetts. With BlueMoney, the software is integrated into your Web site, and consumers can make purchases from their PCs.
"There's no software for customers to download; it's all processed on the Internet," says BlueMoney co-founder and CEO John Sweet. "If your customer doesn't have a wallet set up, they can create one during their transaction."
To make a purchase, customers choose the item from your Web site, then click on the BlueMoney icon to pay for it. Customers' credit card numbers are stored only on the BlueMoney server. The bottom line? BlueMoney is more convenient for customers, says Sweet, and that could mean more sales for entrepreneurs.
You can download the software for free at http://www.bluemoney.com without tech support through June. If you want support, the package costs $995, plus $295 for direct-deposit Internet processing capabilities. The company charges 5 cents per transaction but waives the first 3,000 transactions per month.
Strategic Management Group Inc., 3624 Market St., University City Science Center, Philadelphia, PA 19104, http://www.smginc.com