JOBS ACT Unintended Consequences: Already-Public Companies Reaching Out For More Cash blog update courtesy of extracts from the WSJ story “Rules Eased For StartUps Benefit Older Companies”

But another breed of company is angling to benefit from the Jumpstart Our Business Startups Act: freely traded firms, a few of which have been operating for a long time.

Salon Media Group Inc., SLNM -21.05% a 19-year old financially fighting Internet media business, and Giggles N Hugs Inc., GIGL 21.28% a seven-year old food-and-play-space chain, are among dozens of publicly traded companies that have signaled they intend to solicit investors using the new independence in the JOBS Act. Both trade on the over-the-counter market, and auditors have raised worries about their capability to continue operations.

The businesses are seeking new investors using some of the JOBS Act that lets small-scale private businesses advertise to affluent people, known as “accredited investors,” changing an 80-year old “general solicitation” marketing prohibition designed to safeguard investors.

The companies’ use of advertising independence meant for young start-ups exemplifies how a surprisingly extensive array of players expect to obtain an advantage under the brand new law. “You can place it in the class of unintended effects,” says New York securities attorney Douglas Ellenoff, referring to using the JOBS Act by publicly traded firms. “The entire purpose” of the law “was to allow it to be simpler for private companies to raise money,” he adds. Continue reading