So it applies to a situation when you hold stock of a company that's large enough to issue stock, but is, and has always been, small enough to never have more than $50M in assets, and you must hold the stock for at least 5 years. How common is that?
The requirement was only that you acquired the stock when the company has less than $50M (now $75M) in assets. If the company now has $1B in assets, you still get the tax exclusion up to the limit on stock that was purchased back when the company was small. It specifically advantages investment in small companies that then turn into large companies.
it's that ever part that the GP got confused about. the company assets have to have never exceeded $50M before you acquire the stock, not just at the time you acquire it.