Two traditional retailers and a manufacturer have joined the ranks of hot tech companies like Facebook in the debate over a U.S. securities rule that can force privately held companies to disclose finances they'd rather keep secret.
The three companies - Wawa Inc, Wegmans Food Markets Inc, and W.L. Gore & Associates, best known as the maker of GORE-TEX clothing - have formed a loose coalition and retained a former U.S. congressman as their lobbyist.
They are lobbying for legislation that would increase the number of shareholders a company can have before it must make detailed disclosures to the U.S. Securities and Exchange Commission, and exempt employees from that cap.
The cap has stood at 500 for over four decades.
Unlike Facebook, which had to find a way around the rule to attract outside investors and still stay private, the older companies say the limit threatens their ability to offer stock-based compensation plans to senior managers.
As we grow, we don't have the ability to retain and attract the number of people we'd like because of the restriction of this rule, said Paul Speranza, vice chairman and general counsel of Wegmans, a grocery chain based in Rochester, New York.
In an interview with Reuters, Speranza said Wegmans is quite close to the 500-shareholder limit.
Lobbying for the privately held companies is a team headed by Thomas Reynolds, who served in Congress for 10 years as a Republican representing the Buffalo, New York, area.
Now a lobbyist with the firm Nixon Peabody, Reynolds has lobbied for Wegmans since May, according to a registration he filed. This month, he filed paperwork for two other clients: Wawa, which sells gasoline and food at 600 stores along the East Coast, and W.L. Gore.
The involvement of the companies, with decades of history and established corporate cultures, may broaden a regulatory debate that has focused on tech companies like Facebook and Twitter, which want access to more investor cash but are not quite ready for initial public offerings.
Wawa is not a high-growth, go-go, potential IPO that doesn't want SEC disclosure, said John Coffee, a Columbia University law professor.
Companies like Wawa would get most of the protection they want through a provision that excludes employees from the total tally of shareholders, Coffee said.
Still, Coffee voiced concern that the Senate bill, as written, would make investors vulnerable by exempting too many big companies from disclosing important information.
The debate is playing out at the SEC, which appointed an advisory committee to review possible changes to reporting requirements to make it easier for small, fast-growing companies to raise capital.
Congress is also considering loosening the rule.
A bill that passed a House committee in October would bump the shareholder limit up to 1,000, while a version in the Senate would raise it to 2,000. Both bills would exempt shares received as part of an employee compensation plan.
Lawmakers have promoted the changes as a way to boost capital raising and economic growth, but they are trying to ensure that the reforms don't erode investor protections.
In testimony at a Senate hearing earlier this month, Wawa's incoming chief executive and current chief financial officer, Christopher Gheysens, said the 500-shareholder limit will force the company to make a big decision in the not-so-distant future.
We will be required to choose between becoming a public reporting company and initiating a costly, time-consuming corporate restructuring, Gheysens said.
Wawa would likely choose to restructure under a process such as a reverse stock split, rather than make public reports that may come with heavy compliance costs, Gheysens said.
(Editing by Steve Orlofsky)