Wawa Joins Coalition to Protect Private Financial Information

WASHINGTON, D.C. -- One of the reasons some companies remain private -- as opposed to selling stock on an exchange -- is the ability to keep their finances private. However, a U.S. securities rule can force privately held companies to disclose finances.

In an effort to loosen this rule, convenience store chain Wawa Inc. is among three companies that formed a coalition and retained a former U.S. congressman as their lobbyist, reported Reuters.

Wawa has joined forces with supermarket chain Wegmans Food Markets Inc. and W.L. Gore & Associates -- known for its GORE-TEX clothing -- to lobby for legislation that would increase the number of shareholders a private company can have before it must make detailed disclosures to the U.S. Securities and Exchange Commission (SEC). Leading the coalition's charge is Thomas Reynolds, a 10-year Congressman who formerly represented the Buffalo, N.Y., area.

The shareholder cap before companies must reveal their financial data has been at 500 for the past four decades. The three-company consortium said the limit threatens their ability to offer stock-based compensation plans to senior managers.

One possible solution would be to exclude employees from the tally of shareholders, John Coffee, a Columbia University professor, told Reuters. If enacted, it would greatly help Wawa, he said. "Wawa is not a high-growth, go-go, potential IPO that doesn't want SEC disclosure," Coffee told the news outlet.

Reynolds, now with Nixon Peabody LLP, has not seen his efforts fall on deaf ears. The SEC is currently debating the issue. The House of Representatives and Senate have understood the consortium's concerns as well. A bill that passed a House committee in October would raise the shareholder limit up to 1,000, while a similar Senate bill would potentially raise the limit to 2,000 shareholders.

If neither bill passes though, Wawa will be forced to make major changes, its current CFO and incoming CEO Christopher Gheysens said during a Senate hearing last month. "We will be required to choose between becoming a public reporting company and initiating a costly, time-consuming corporate restructuring," Gheysens said.

Reuters added that Wawa would likely choose to restructure under a process such as a reverse stock split, as opposed to paying heavy accounting costs affiliated with filing for an initial public offering and becoming a public company.

A reverse stock split reduces the number of shares or shareholders in a company by increasing the price per share of stock. For example, let's say a share of a company was worth $10 each and a person held 10 shares. If a company announces a 10-for-1 reverse stock split, that shareholder would then own one share of the company, which would be worth $100 per share.