Bill Overview
Title: To permit an issuer, when determining the market capitalization of the issuer for purposes of testing the significance of an acquisition or disposition, to include the value of all shares of the issuer.
Description: This bill expands the information allowed when calculating whether an acquisition or disposition of a subsidiary is significant for purposes of required financial disclosures by publicly traded companies. Currently, an acquisition or disposition is considered significant when the company's investment in the subsidiary is calculated to exceed 10% of the aggregate worldwide market value of the company's voting and non-voting common equity. Under the bill, this market value may additionally include applicable trading value, conversion value, or exchange value of all of the company's outstanding classes of stock, including preferred stock and non-traded common shares that are convertible into or exchangeable for traded common shares.
Sponsors: Rep. Hill, J. French [R-AR-2]
Target Audience
Population: Investors, publicly traded companies, company executives and shareholders
Estimated Size: 150000000
- Publicly traded companies will need to follow new guidelines for calculating market capitalization.
- Investors rely on financial disclosures for making investment decisions and will be impacted by any change in disclosure requirements.
- Markets could be impacted by changes in perceived value of companies based on new market cap calculations.
- Company executives and shareholders may be impacted by changes in acquisition and disposition strategies due to the new rules.
Reasoning
- The policy specifically targets publicly traded companies and affects the way they report acquisitions and dispositions. Its implications extend beyond these corporations, touching investors, executives, and shareholders who depend on accurate financial information to make informed decisions.
- The US, with its vast number of publicly traded companies, forms a significant portion of the target population. Investors in the US rely heavily on transparency and precision in financial disclosures to guide their strategies.
- While the policy does not directly target individuals, its ripple effects can significantly influence household investments, retirement plans, and overall financial security, which are core elements affecting self-reported wellbeing.
- The budget constraints suggest that the policy implementation might focus primarily on educating relevant stakeholders about the new rules and monitoring compliance without excessive surveillance infrastructure.
- The commonness of specific profiles affected by this policy can vary; executives and shareholders in publicly traded companies are less common compared to general investors, who might indirectly depend on clearer disclosures for their portfolios.
Simulated Interviews
Financial Analyst (New York, NY)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- I think this policy will provide a clearer picture of a company’s true market value.
- It might initially create some adjustment pains as firms learn to use the expanded metrics, but ultimately it's beneficial.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 6 |
CEO of a mid-sized publicly traded tech company (Los Angeles, CA)
Age: 55 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- We need to reassess our acquisition strategy in light of these new calculation rules.
- I am concerned about the potential increased complexity in compliance.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 7 |
Retail Investor (Chicago, IL)
Age: 30 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 9.0 years
Commonness: 15/20
Statement of Opinion:
- I like that this policy could mean more transparency in financial reports.
- It'll help prevent incidents where I'm blindsided by sudden stock movements due to M&A activities.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Retired (Miami, FL)
Age: 60 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 18/20
Statement of Opinion:
- I'm largely unaffected directly by these changes, but indirectly clarity in company valuations impact my portfolio's stability.
- Hopefully, my funds won't be adversely affected by companies grappling with new disclosure rules.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 7 |
Compliance Officer (Houston, TX)
Age: 50 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- This will increase my workload but it should lead to more accurate reporting.
- I’m slightly concerned about the costs associated with implementing these new reporting standards.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 6 |
Tech Entrepreneur (San Francisco, CA)
Age: 29 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 5/20
Statement of Opinion:
- This new rule could make our path to going public more complex.
- I need to understand how this affects our growth strategy and how potential investors see us.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
University Professor of Finance (Boston, MA)
Age: 40 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- This is an interesting development in corporate finance regulations.
- I’m looking forward to analyzing the long-term impact of these market valuation changes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 7 |
Cryptocurrency Investor (Seattle, WA)
Age: 35 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 4.0 years
Commonness: 8/20
Statement of Opinion:
- This could steer me towards stocking, considering the new transparency it offers.
- However, I'm more concerned about how this complexity might confuse traditional investors.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 6 |
Stock Broker (Dallas, TX)
Age: 48 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 7.0 years
Commonness: 9/20
Statement of Opinion:
- Improved disclosures are good news; it helps me in advising my clients better.
- I still worry about how quick companies will adapt and what it means for reporting timelines.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 9 |
| Year 2 | 8 | 9 |
| Year 3 | 8 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 8 |
Retired (Denver, CO)
Age: 67 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 15.0 years
Commonness: 19/20
Statement of Opinion:
- I'm not directly involved, but my investment's stability rests on these kind of regulations.
- As long as it doesn't negatively impact stock prices too much, I see it as a positive change.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Cost Estimates
Year 1: $150000000 (Low: $100000000, High: $200000000)
Year 2: $50000000 (Low: $30000000, High: $80000000)
Year 3: $50000000 (Low: $30000000, High: $80000000)
Year 5: $50000000 (Low: $30000000, High: $80000000)
Year 10: $50000000 (Low: $30000000, High: $80000000)
Year 100: $50000000 (Low: $30000000, High: $80000000)
Key Considerations
- This policy primarily affects publicly traded companies and their calculation of market capitalization for significant acquisitions or dispositions.
- Initial implementation might require significant recalibration of financial systems in affected companies.
- Long-term savings could arise from increased financial disclosure transparency and efficiency, offsetting some of the initial compliance costs.