Today the Securities and Exchange Commission ("SEC") issued a set of FAQs clarifying a number of ambiguities regarding the confidential submission process for the initial public offerings of Emerging Growth Companies ("EGC") under the Jumpstart Our Business Startups Act.
You can find the complete SEC FAQ release here.
We summarize a few important points below.
- As we predicted in our recent client alert on the JOBS Act ("JOBS Act: Impact and Open Questions"), EGCs will be able to participate in "testing the waters" communications (including meetings) with QIBs and accredited investors, notwithstanding the fact that they have not yet publicly filed their registration statements. There had been some confusion regarding this point because the JOBS Act requires issuers to file all of their registration statements publicly at least 21 days before commencing "a roadshow." The SEC makes clear that it does not interpret this requirement as referring to these "testing the waters" meetings. It instead interprets the law as referring to a roadshow in the traditional sense and asks issuers to keep the Staff up to date on expected timing.
- In a non-traditional offering where there is no roadshow and where the EGC does not meet with QIBs or accredited investors, the SEC stated that the 21-day period is measured from the anticipated effective date of the registration statement. However, in a non-traditional offering with no roadshow, if the EGC does communicate with QIBs or accredited investors, the SEC will deem those communications to be a roadshow, and the 21-day period would be measured from the start of those communications.
- When an issuer that has been confidentially submitting its registration statements makes its initial public filing, that registration statement should attach all the previously submitted registration statements as separate Exhibit 99s.
- Consistent with its April 5, 2012 announcement, the SEC reconfirmed that draft registration statements need not be accompanied by a filing fee. Filing fees will be due only when the registration statement is filed publicly with the SEC on EDGAR.
- The SEC made clear that draft registration statements confidentially submitted to it must be substantially complete, including containing signed audited reports. However, they do not need to be signed or include expert consents. This position is consistent with the SEC's longstanding position regarding confidential submissions by certain foreign private issuers.
- EGCs that have already filed publicly may switch over to the confidential submission process. It remains to be seen whether EGCs will "go dark" pursuant to this accommodation as it may be perceived by the market as a loss of IPO momentum.
- An EGC that submits a registration statement confidentially is not permitted to announce the anticipated offering in reliance on Rule 134 under the Securities Act until it publicly files the registration statement. Any announcement of the offering prior to the public filing of the registration statement would only have available the little-used safe harbor provided by Rule 135 under the Securities Act.
- An EGC may confidentially submit a registration statement so long as its initial public offering date has not occurred. However, the definition of initial public offering is not limited to primary sales for cash and would include resale registration statements for selling securityholders and offers of common equity pursuant to an employee benefit plan registered on a Form S-8.
- The SEC made clear that foreign private issuers that meet the definition of an EGC may use the confidential submission process. Further, foreign private issuers that are currently engaged in the confidential submission process must now use the method prescribed for EGCs, which involves mailing a searchable PDF copy of the registration statement to the SEC on a DVD.
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© 2012 White & Case LLP