WAWA, Pa. -- Wawa Inc., Wegmans Food Markets Inc, and W.L. Gore & Associates, best known as the maker of GORE-TEX clothing, have formed a coalition and retained a former U.S. congressman as their lobbyist over a U.S. securities rule that can force privately held companies to disclose their finances, according to a Reuters report.
The companies 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 & Exchange Commission (SEC), and exempt employees from that cap.
The cap has stood at 500 for more than four decades, said the report.
In testimony at a Senate hearing earlier this month, Wawa's incoming CEO and current chief financial officer, Christopher Gheysens, said the 500-shareholder limit will force the company to make a big decision soon.
"We will be required to choose between becoming a public reporting company and initiating a costly, time-consuming corporate restructuring," Gheysens told Reuters.
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, he added.
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, N.Y., 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 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 (IPOs), the report said.
"Wawa is not a high-growth, go-go, potential IPO that doesn't want SEC disclosure," John Coffee, a Columbia University law professor, told the news agency. Companies like Wawa "would get most of the protection they want through a provision that excludes employees" from the total tally of shareholders, he 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, said Reuters.
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.
Wawa, Pa.-based Wawa Inc. currently operates almost 600 c-stores in Pennsylvania, Delaware, Maryland, New Jersey and Virginia.
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