by Cydney Posner
…submit a confidential draft registration statement for IPOs, as well as for most offerings made in the first year after going public, Corp Fin announced yesterday. Until now, that beneficial process, first permitted by the JOBS Act, has been available only to emerging growth companies. The extension of this confidential process will allow more companies to defer the public disclosure of sensitive or competitive information until they are almost ready to market the offering—and potentially to avoid the public disclosure altogether if they ultimately decide not to proceed with the offering. According to the press release, the change “will provide companies with more flexibility to plan their offering. The nonpublic review process after the IPO reduces the potential for lengthy exposure to market fluctuations that can adversely affect the offering process and harm existing public shareholders. By requiring a public filing period prior to the launch of marketing, the process incorporates a feature of the EGC review process that provides an opportunity for the public to evaluate those offerings.” The new process will become available on July 10, 2017.
Securities Act IPOs and initial registrations of a class of securities under Exchange Act Section 12(b)
The Corp Fin staff will review the draft initial IPO registration statement and related revisions on a confidential basis so long as the issuer confirms in a cover letter with the 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.” Similarly, an issuer submitting a draft registration statement and related revisions for an Exchange Act registration must confirm in a cover letter with the 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.” In a footnote, the staff indicates that it “will keep submitted nonpublic draft registration statements confidential subject to the provisions of applicable law,” and suggests that issuers should consider filing a CTR under Rule 83 in submitting draft registration statements for nonpublic review.
Securities Act offerings within one year of an IPO or Exchange Act Section 12(b) registration
The staff will also confidentially review draft registration statements “submitted prior to the end of the twelfth month” following the effective date of an IPO registration statement or a Section 12(b) registration statement, so long as the issuer confirms in a cover letter with its submission that it will file its registration statement and nonpublic draft submission publicly on EDGAR at least 48 hours prior to any requested effective time. One difference applies with regard to these offerings: only the initial submission will be treated confidentially; responses to staff comments must be made in a public filing, not a revised draft registration statement. Any additional review and requests for acceleration will follow normal procedures. As with IPOs, the issuer must file the confidentially submitted draft registration statement at the time it publicly files its registration statement.
Foreign private issuers
FPIs may follow any of a number of paths: they can follow these new procedures, the procedures available to EGCs (if they qualify as EGCs) or follow the staff’s May 30, 2012 statement. (See this Cooley new brief.)
Contents of draft registration statements
While issuers are encouraged to submit draft registration statements that are “substantially complete,” the staff will not delay review of a registration statement that omits certain financial information “if an issuer reasonably believes omitted financial information will not be required at the time the registration statement is publicly filed.” (Emphasis added.) The announcement notes that this “relief is intended to be similar to the relief provided by Section 71003 of the Fixing America’s Surface Transportation Act, which allows an EGC to omit financial information that ‘relates to a historical period that the issuer reasonably believes will not be required to be included…at the time of the contemplated offering.’” (Emphasis added.) (See this PubCo post, this PubCo post and this PubCo post.) The announcement also indicates that the staff will “consider an issuer’s specific facts and circumstances in connection with any request made under Rule 3-13 of Regulation S-X.” That rule makes room for special written requests to omit or substitute certain financial statements.
Issuers that elect to take advantage of this expanded process must follow the process prescribed for EGCs to submit draft registration statements on a nonpublic basis. (See e.g., relevant sections of this Cooley Alert, this Cooley News Brief and this PubCo post, which updates some of the preceding.) The expansion of the process to include non-EGCs will not affect the confidential process for EGCs.
The staff is encouraging companies to review the timing of their deals with their reviewers, who will consider reasonable requests to expedite processing. The announcement notes that the staff will be monitoring this process going forward.
Sounds like the Form ID has not yet been updated for the new process. Until it has been, the staff advises that, for issuers that do not yet have EDGAR codes and will therefore need to file Forms ID, to preserve confidentiality, they should indicate on the Form that they intend to use the codes to submit a draft registration statement under JOBS Act §106, even though they are not EGCs.
SideBar: Surprisingly, not everyone was thrilled with the JOBS Act or even the confidential filing process, at least initially. In this mid-2013 article from the WSJ, Bankers: The JOBS Act Isn’t Doing its Job, the author contends that if “you ask investment bankers, most of them will say the JOBS Act has fallen flat.” However, the new confidential filing process has been widely adopted, with estimates of 150 companies that had filed confidentially under the rule, even at that early date. “Nevertheless, bankers have complained the confidentiality granted by the JOBS Act has obscured the pipeline, making it more difficult to pinpoint windows in the market.” (See this Cooley News Brief.)