Effective July 10, 2017, the U.S. Securities and Exchange Commission will review draft registration statements for initial public offerings and follow-on offerings within the first year of initial registration on a nonpublic basis, regardless of whether the issuer qualifies as an emerging growth company. Keeping with current procedure, upon public filing of the registration statement, prior drafts and related comments will also become publicly accessible.
Secrecy leading up to an IPO can help an issuer keep sensitive, competitive information private for a significantly longer period of time and, sometimes more importantly, can afford the issuer flexibility in timing the offering. Without a pending offering on the market’s radar, the issuer can remain on the sidelines, free from watchful eyes and imposed expectations, until the time is right for it to proceed. In some instances, an issuer can even withdraw a draft registration statement if markets stall or if its offering otherwise does not proceed without having the public stigma of a failed offering highlighted in the press.
Issuers desiring to keep the preliminary process under wraps must indicate to the SEC in the cover letter for the nonpublic submission that they will publicly file the registration statement no later than 15 days prior to the commencement of any road show (or in absence of a road show, 15 days prior to the requested effective date of the registration) in the case of an initial registration and no later than 48 hours prior to the requested effective time for follow-on offerings. For follow-on offerings, the SEC will only review one draft of the registration statement; any response to SEC comment or other amendment must be publicly filed.
Issuers that are not emerging growth companies will need to follow some additional procedures under SEC Rule 83 to ensure confidentiality of draft submissions. Note also that, although the SEC will process draft registration statements that are substantially complete except for financial information the issuer reasonably believes will not be required at the time of public filing, only emerging growth companies may omit such information from a public filing.
Issuers completing a Form ID to obtain EDGAR access codes for the first time should be sure to check the “JOBS Act §106” box regardless of emerging growth company status. This will enable the submission to remain nonpublic until the public filing occurs. The SEC has published additional guidance regarding voluntary draft submissions in the form of FAQs on its website.
If you would like to discuss the possibility of pursuing a draft registration statement submission or if you have any questions about the public offering process, one of our securities attorneys would be happy to speak with you.
Special thanks to Amanda Keister, contributing writer.