SEC Now Allowing All Companies to Make Confidential IPO Filings

In effort to boost capital formation, SEC now allowing all companies to make confidential IPO filings

In an effort to boost capital formation, the Securities and Exchange Commission (SEC) recently announced that it will accept voluntary draft registration statement submissions from all issuers for nonpublic review. The change went into effect on July 10, 2017.

The ability to keep filings confidential in the early stages of an initial public offering (IPO) was previously limited to emerging growth companies. Snap and Twitter are two well-known examples of companies that previously relied on the JOBS (Jumpstart Our Business Start-Ups) Act provision. According to the SEC, 1,350 confidential IPO filings have been submitted, as of March 31, 2017.

The SEC is hopeful that expanding the opportunity to all companies will encourage more companies to take the IPO plunge, given that the market has lagged in recent years. “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,” said new SEC Chair Walter J. Clayton.

SEC Filings that Can Be Made Confidentially

For companies planning an IPO, the SEC advised that it will review a draft initial Securities Act registration statement and related revisions on a nonpublic basis provided that the issuer confirms in a cover letter to the nonpublic draft submission that it will publicly file its registration statement and nonpublic draft submissions at least 15 days prior to any road show or, in the absence of a road show, at least 15 days prior to the requested effective date of the registration statement. Moreover, the submitter of the information must comply with SEC’s Confidential Treatment Procedure under Rule 83.

The confidential submission process will be available for businesses pursuing a direct listing on a stock exchange without conducting an IPO. In those cases, the SEC will review a draft registration statement and related revisions on a nonpublic basis provided that the issuer confirms in a cover letter to the nonpublic draft submission that it will publicly file its registration statement and nonpublic draft submissions at least 15 days prior to the anticipated effective date of the registration statement for its listing on a national securities exchange.

Finally, the SEC will also accept draft registration statements submitted prior to the end of the twelfth month following the effective date of an issuer’s initial Securities Act registration statement or an issuer’s Exchange Act Section 12(b) registration statement for nonpublic review. The agency advises that an issuer submitting a draft registration statement for nonpublic review in these circumstances should confirm in its cover letter that it will publicly file its registration statement and nonpublic draft submission such that it is publicly available on the EDGAR system at least 48 hours prior to any requested effective time and date.

SEC staff comments may ultimately become public.

Benefits of the Non-Public Review Process

Filing initial draft registration statements confidentially allows companies to work out any issues with the SEC outside of the public spotlight. As highlighted by the SEC, the non-public review process also “reduces the potential for lengthy exposure to market fluctuations that can adversely affect the offering process and harm existing public shareholders.”

The ability to opt into the initial non-public review requires meeting certain technical requirements when filing and potential issuers should consult with legal counsel in seeking to do so.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Jeffrey Cassin, at 201-806-3364.