on the following day. The issuer then files a final prospectus with the SEC that contains the final offering information. On the third or fourth business day following pricing,
the closing occurs, the shares are issued, and the issuer receives the proceeds. The closing completes the offering process. Then, for the following 25 days, aftermarket sales of shares by dealers must be accompanied by the final prospectus or a notice with respect to its availability. If during this period there is a material change that would make the prospectus misleading, the issuer must file an amended prospectus.
SPECIAL JOBS ACT-RELATED CONSIDERATIONS
Confidential submissions As explained in Chapter 1, an EGC may make a confidential submission of its registration statement, provided that the initial confidential submission and all amendments are publicly filed with the SEC no later than 21 days before the commencement of the issuer’s road show. Although an EGC may file confidentially, and a confidentially-submitted draft registration statement is not required to be signed by the issuer and its officers or directors, nor is it required to contain a signed auditors’ consent, the confidential submission should be a complete registration statement. The SEC may decide not to review a draft submission that is deemed incomplete or materially deficient. This will just slow down the IPO process. Moreover, the issuer and its advisers should understand, as noted above, that the initial confidential submission will become publicly available. As a result, the issuer, its advisers and the entire working group should approach the preparation of a confidential submission with the same rigour as they would approach the preparation of a registration statement that will be publicly filed and available to all, including the issuer’s competitors. There are few, if any, disadvantages to the confidential submission process. An issuer will be able to make a confidential submission and proceed with the review process without the glare of publicity, and without having competitors become aware of the proposed offering. The issuer will have greater flexibility to control the timing of the offering. If the market seems inhospitable to an offering, the issuer may decide to delay the process and will not subject itself to public scrutiny for doing so. If the issuer needs to withdraw the filing, again, it will be able to do so without the stigma associated with a failed or
30 JOBS Act Quick Start
withdrawn offering. An issuer and its bankers and advisers may not, however,
have as much insight into the IPO market given the confidential filing process. For example, bankers may not be aware of competitors (that are EGCs) that also are pursuing IPOs because the competitors also may be proceeding with their offerings on a confidential basis. Often having information about other companies in the IPO queue may be important because it may factor into decisions on timing of marketing the deal, as well as decisions regarding valuation. Often an issuer will decide to pursue a dual-track
approach, whereby it will decide to undertake an IPO and also consider M&A alternatives. The IPO filings often serve to make acquisitive competitors that may be interested in new opportunities aware of the issuer and the issuer’s performance. It may be more difficult to pursue a dual-track strategy during the confidential submission process. Of course, an issuer that is relying on the confidential submission process may choose to make an announcement regarding its intentions to pursue an IPO, and a few companies have issued such press releases. Since the confidentiality obligation rests with the SEC, and not with the issuer, a press release of this sort is permissible, although it should be considered carefully given that it undoes many of the benefits associated with the confidential process.
Marketing the offering Section 5(c) of the Securities Act prohibits offers of a security before a registration statement is filed. While gun- jumping can be a serious concern, the 2005 safe harbours created by Securities Offering Reform have provided considerable guidance to companies about this issue. Further, the ability of EGCs to test-the-waters before filing, together with the elimination of the ban on general solicitation in connection with certain private placements also effected by the JOBS Act have also significantly reduced concerns about gun-jumping. In addition, the confidential submission of a draft registration does not constitute the filing of a registration statement for the purposes of the prohibition in Securities Act section 5(c) against making offers of a security in advance of filing a registration statement.1 Section 5(b)(1) prohibits written offers other than by
means of a prospectus that meets the requirements of section 10 of the Securities Act, such as a preliminary prospectus. The bans are designed to prohibit inappropriate marketing, conditioning or hyping of the security before all investors have access to publicly available information about the company so that they can make
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