Test-the-waters communications and the 21-day filing requirement Securities Act section 6(e) provides that confidential registration statement submissions must be publicly filed with the SEC at least 21 days before the issuer conducts a road show. The term “road show” is defined as “an offer … that contains a presentation regarding an offering by one or more members of the issuer’s management … and includes discussion of one or more of the issuer, such management, and the securities being offered.”31
Given the
breadth of this definition, the SEC has addressed the issue of whether the test-the-waters communications under Securities Act section 5(d) that are discussed above could be considered a road show for the purposes of triggering the 21-day filing requirement.32 The SEC has noted that in a traditional underwritten
public offering where test-the-waters communications are not used, the road show could be easily identified as “those meetings traditionally viewed as the road show when the emerging growth company and underwriters begin actively marketing the offering.” Under these circumstances, the EGC would be able to estimate when it expects to begin that road show, and then publicly file the registration statement and all of the confidential submissions at least 21 days before that date. Because Securities Act section 5(d)
specifically contemplates test-the-waters
communications taking place before filing a registration statement, and in the interest of reading the provisions in a consistent fashion, the SEC will not object if an EGC does not treat test-the-waters communications conducted in reliance on Securities Act section 5(d) as a road show for purposes of Securities Act section 6(e). The SEC notes, however, that if an issuer were to have meetings or other communications that meet the definition of a road show and which do not fall within the test-the-waters communications contemplated by section 5(d), then the 21-day filing requirement would be triggered based on the timing of such meetings. If an EGC does not conduct a traditional road show and does not engage in activities that would come within the definition of a road show, other than test-the-waters communications that comply with Securities Act section 5(d), the SEC Staff indicates that the issuer’s registration statement and confidential submissions should be filed publicly no later than 21 days before the anticipated date of effectiveness of the registration statement.33
Registration statement disclosure for EGCs The SEC has indicated that an EGC must identify itself as an EGC on the cover page of the prospectus.34
In addition, SEC staff comments on EGC registration statements have
requested the following disclosures: • a description of how and when a company may lose EGC status;
• a brief description of the various exemptions that are available to an EGC, such as exemptions from Sarbanes-Oxley section 404(b) and the Say-on-Pay/Say- on-Golden Parachute provisions; and
• the EGC’s election under section 107(b) of the JOBS Act for extended transition to new or revised accounting standards. The SEC staff requests that if the EGC has elected to
opt out of the extended transition period for new or revised accounting standards, then it must include a statement that the election is irrevocable. If the EGC has elected to use the extended transition period, then risk factor disclosure must explain that this election allows an EGC to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. The SEC staff also requests that the EGC state in the risk factors that, as a result of this election, the EGC’s financial statements may not be comparable to issuers that comply with public issuer effective dates. A similar statement is also requested in the EGC’s critical accounting policy disclosures in MD&A. An EGC is required to present only two years of audited
financial statements in its initial public offering registration statement.35
An EGC may also limit its
MD&A to only cover those audited periods presented in the audited financial statements. The SEC has indicated that, notwithstanding Securities Act section 7(a)(2)(A)’s reference to “any other” registration statement, the SEC staff will not object if an EGC presenting two years of audited financial statements limits the selected financial data included in its initial public offering registration statement to only two years.36
For financial statements
required under Rules 3-05 and 3-09 of Regulation S-X, the SEC staff will not object if only two years of financial statements are provided in the registration statement, even if the significance tests result in a requirement to present three years of financial statements for entities other than the issuer.37
The SEC staff has further noted that it will not
object if an issuer presents the ratio of earnings to fixed charges required by Item 503(d) of Regulation S-K for the same number of years for which it provides selected financial data.38 An EGC may comply with the executive compensation disclosures applicable to a “smaller reporting company” as defined in the SEC’s rules, which means that an EGC need provide only a Summary Compensation Table (with three rather than five named executive officers and limited to
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