The push to make it easier for start-ups to remain private for a longer period of time is sometimes called the Facebook Bill — but its biggest Silicon Valley supporter may be Twitter.
Today, Twitter CEO Dick Costolo and founder Jack Dorsey were among the more than three dozen high-profile signers of a letter urging the Senate to pass a new bill that could quadruple to 2,000 the number of shareholders a private company could have before it is forced to disclose its financial information.
Forcing a company to disclose its previously-private financial data is often the catalyst to having them go public.
“We are writing this letter to strongly urge Congress to pass legislation that will modernize the decades-old ‘500 Shareholder Rule,’” the letter, sent to the Senate, reads.
“The rule, implemented in 1964, compels private companies to become public reporting companies once they exceed 499 shareholders and have more than $10 million in assets.
The 500 Shareholder Rule is outdated, overly restrictive, and limits U.S. job creation and American global competitiveness,” reads the letter, a copy of which has been obtained by The Post.
The bill, designed to make it easier for companies to raise capital, has already passed the House. It has been sometimes called the Facebook Bill because the issue garnered much attention as the social network company raised money through Goldman Sachs earlier this year.
Regulators were looking into the fundraising round — where Goldman, despite selling stakes to various investors was listed as a single shareholder — and whether it was designed to thwart shareholder reporting rules.
Facebook does not appear to be waiting for a rules change as it marches toward a likely IPO in 2012. However, the change could spare a less financially mature company, such as Twitter, from going public.
Twitter has benefitted on private markets where its valuation has soared and it has not had to submit to public scrutiny.
Costolo and Dorsey joined a host of tech founders and venture capitalists imploring the Senate to pass the bill, which also received a crucial nod from the left-leaning Progressive Policy Institute.
Senate Democrats are seen as likely opponents of the measure.
The new bill has been championed by New York-based SecondMarket, whose CEO Barry Silbert has frequented Washington to lobby on its behalf.
SecondMarket stands to gain as an alternative platform to public markets for raising capital. Silbert will testify before a Senate panel tomorrow.