CHAPTER 3 Applying Title I to other transactions
the IPO on-ramp provisions in Title I should not also apply in the context of other transactions conducted by EGCs pursuant to a Securities Act registration statement. The SEC’s Division of Corporation Finance has provided guidance in the form of frequently asked questions indicating that EGCs may rely on certain of the disclosure, communications and confidential submission benefits for EGCs in the context of merger and exchange offer transactions.1
W An overriding principle of the
guidance in these FAQs is that an EGC which avails itself of the Title I provisions in the context of an exchange offer or a merger must comply with all of the pre-existing applicable rules for tender offers and proxy solicitations, which might, in some cases, conflict with the more liberal communications approach contemplated by Title I of the JOBS Act. The SEC has also provided guidance regarding the EGC status of issuers that are spun off from SEC reporting issuers.
Availability of test-the-waters communications As discussed in Chapter 1, Title I of the JOBS Act provides EGCs, or any other person authorised to act on their behalf, the flexibility to engage in oral or written communications with QIBs and institutional accredited investors in order to gauge their interest in a proposed offering, whether before or following the first filing of any registration statement, subject to the requirement that no security may be sold unless accompanied or preceded by a prospectus.2
An EGC could use this test-the-waters
provision with respect to any registered offerings that it conducts while it qualifies for EGC status. There are no form or content restrictions on these communications, and there is no requirement to file written communications with the SEC (although the SEC staff requests that written communications be submitted to them when they review an EGC’s registration statement). The SEC has confirmed that an EGC may use test-the- waters communications with QIBs and institutional
36 JOBS Act Quick Start
Confidential draft registration statement submissions As discussed in Chapter 1, Title I added paragraph (e) to section 6 of the Securities Act to provide that the SEC must review all EGC initial public offering registration statements confidentially, if an EGC chooses to submit a draft registration statement to the SEC. An EGC may confidentially submit a draft registration statement for an initial public offering for non-public review, provided that the initial confidential submission and all amendments are publicly filed with the SEC no later than 21 days before the issuer’s commencement of a road show.4 The SEC has indicated that an EGC may use the confidential submission process in section 6(e) of the Securities Act to submit a draft registration statement for an exchange offer or a merger that constitutes its initial public offering of common equity securities.5
If an EGC
uses the confidential submission process to submit a draft registration statement for an exchange offer or merger that constitutes its initial public offering of common equity securities, the SEC notes a number of obligations under the Securities Act and Exchange Act with respect to the transaction. If an EGC does not commence its exchange offer before
the effectiveness of the registration statement, the EGC must publicly file the registration statement (including the initial confidential submission and all amendments thereto) at least 21 days before the earlier of the commencement date of the road show, if any, or the
hile Title I of the JOBS Act is largely focused on capital-raising transactions, there is nothing in the JOBS Act or in the SEC’s interpretations to suggest that
accredited investors pursuant to Securities Act section 5(d) in connection with an exchange offer or merger.3
In
addition, the SEC staff notes that an EGC must make all required filings under the Exchange Act for any written communications made in connection with, or relating to, the exchange offer or merger. In this regard, the SEC notes that the JOBS Act did not amend the exchange offer or merger requirements under the Exchange Act, such as filings required under Exchange Act Rules 13e-4(c), 14a- 12(b), and 14d-2(b), for pre-commencement tender offer communications and proxy soliciting materials in connection with a business combination transaction.
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