UPDATE: We’re happy to report this post made the Texas Bar Today’s list of the Top 10 blog posts of the week.
A recent change by the U.S. Securities and Exchange Commission gives more companies the ability to submit some SEC filings privately – possibly reducing the risk of market-moving speculation and rumors.
Effective July 10, the SEC is allowing many more companies to submit initial drafts of their registration statements (whether for an IPO or for an offering within one year of an IPO) in private draft form, readable by the SEC staff but not searchable by the public on the SEC’s EDGAR filing system.
By making a submission privately, a company can learn how SEC staff view the company’s disclosures without announcing to the world that they’re committing to a public offering. If the company for any reason decides not to go forward with the offering, it can withdraw its private submission without risk of adverse speculation and rumors spreading through the markets. The newly expanded provision will also apply to companies proposing to list on a US securities exchange such as the NYSE or Nasdaq.
Expansion of JOBS Act of 2012
Previously, under the JOBS (Jumpstart Our Business Startups) Act of 2012, the opportunity to make private submissions for confidential SEC review was only available to smaller, emerging growth companies conducting IPOs, not medium- or large-sized companies, nor any follow-on offerings during the ensuing 12 months. Even with those limitations, the JOBS Act private submission route proved very popular and was credited with encouraging more companies to go public in the US despite the high costs of preparing ongoing SEC reports, including SEC-grade audited financial statements.
To take advantage of the SEC’s expanded private submission opportunity, a company must still promise not to begin formal marketing efforts until the 15th day after the company publicly files a registration statement. This 15-day period allows investors and analysts ample time to review and digest the company’s public disclosures before marketing and pricing activities are in full swing. This condition was also included in the original JOBS Act of 2012.
More Choices for Investors
SEC Chairman Jay Clayton says the move will increase efficiency and encourage investment.
“By expanding a popular JOBS Act benefit to all companies, we hope that the next American success story will look to our public markets when they need access to affordable capital,” he said. “We are striving for efficiency in our processes to encourage more companies to consider going public, which can result in more choices for investors, job creation, and a stronger U.S. economy.”
Sam Garrett has 30 years of business law experience in New York, London, Virginia and Texas. He has done 53 IPOs and over 100 M&A deals. His other specialties include private placements and commercial contracts. Sam can be reached at 972.795.8812 or firstname.lastname@example.org.
This update is for informational purposes only and should not be considered legal advice. Each situation is different, could change any time, and should be analyzed by an attorney.