1.4 The IPO Registration Statement
Note that each activity in the timeline is discussed further below.
1.4.1 Registration Statement Filing and Review Process
The timeline above provides an overview of the IPO process from inception to
closing for a typical 1933 Act registration statement. The IPO process typically
begins with an organizational meeting, commonly referred to as an “all-hands”
meeting, to plan the IPO process, establish a timeline, and coordinate
responsibilities (see A in the timeline above). While the nature of the IPO may
vary, before an entity may commence a public offering of securities, the entity,
or “registrant,” must file a registration statement with the SEC under the
applicable securities laws (see B in the timeline above). The registration
statement contains extensive financial and business-related disclosures about
the entity and the securities being offered. A registrant provides such
disclosures in accordance with (1) Regulation
S-X, which sets forth the SEC’s reporting requirements for
the financial statements, and (2) Regulation
S-K, which sets forth the SEC’s reporting requirements for
information outside the financial statements. Common disclosures required in a
typical IPO registration statement are summarized in Appendix A. Once submitted to or filed
with the SEC, an IPO registration statement is processed and reviewed by the
staff of the Division (see C in the timeline above). The purpose of the review
is to determine whether the registration statement complies with the SEC’s
disclosure requirements. The SEC does not evaluate the merits of securities
offerings or reach a conclusion about whether they are “good” investments;
rather, the Commission evaluates the appropriateness of the disclosure provided.
A company can generally expect the staff to complete its initial review and
furnish the first set of comments within 27 calendar days. The company would
then respond to each of the SEC’s comments and reflect requested edits, as well
as any other updates, in an amended IPO registration statement, which the SEC
will also review. After the initial filing, the SEC’s review time can vary
significantly but typically is within two weeks. A company can expect several
rounds of comment letters with follow-up questions on responses to original
comments as well as additional comments on new information included in the
amended registration statement.
Depending on the length of time between amendments, financial statements and
other information included in the registration statement may need to be updated
to reflect subsequent periods. Certain information, such as estimated pricing of
the IPO and related disclosures, may not be known as of the initial filing date
and therefore is not added until a later amendment. However, the SEC expects
each draft of the registration statement to be substantially complete at the
time of its submission, unless there are specific accommodations for omitting
otherwise required information.
Once all the staff’s comments are cleared, a company will
typically print a preliminary prospectus, commonly referred to as a “red
herring,” and go on a “road show” to meet with and present to prospective
investors; the IPO price will then be determined (see D in the timeline above).
After the road show, the company and its counsel may request that the SEC
declare the registration statement “effective” at a certain date and time, after
which the securities will be registered and, if listed on an exchange, begin
trading. Before the SEC declares the registration statement effective, the
entity will need to obtain approval from the exchange on which it is expected to
be listed (see E in the timeline above). The IPO closing signifies the
completion of the IPO, at which time the company’s securities are issued to
investors. As part of the IPO process, the company's auditor will typically
provide two comfort letters to the underwriters — one upon effectiveness (see E
in the timeline above), which generally coincides with the pricing of the IPO,
and one upon the closing of the IPO (see F in the timeline above), often
referred to as a "bring-down" comfort letter. See Section 6.10 for further
discussion.
While most registration statements will only become effective after the SEC comment process has
been completed and an effective date has been requested by the company and granted by the
SEC, registration statements on Form 10 filed in accordance with Section 12(b) of the 1934 Act are
automatically effective 30 days after certification by an applicable securities exchange. Registration
statements on Form 10 filed in accordance with Section 12(g) of the 1934 Act are automatically effective
60 days after the initial filing. Because a company will be required to begin complying with the periodic
reporting requirements of the 1934 Act after effectiveness, it is critical to understand and plan for the
effective date of any IPO registration statement.
Connecting the Dots
To avoid unnecessary surprises during the SEC’s review
process, management may want to establish a detailed response plan and
filing calendar. Because financial statements “go stale” after certain
dates, it is important to understand when this will happen and to
establish contingency plans in case the timing of amendments crosses
over stale dates. It may also be beneficial to engage all interested
parties (e.g., auditors, underwriters, legal counsel) in planning the
timeline. Management should anticipate various circumstances and be
realistic about the internal resources available to complete the
registration statement and respond to comment letters.
1.4.2 Nonpublic Review Process for Draft Registration Statements
Historically, registration statements filed with the SEC were immediately
accessible to the public via EDGAR, the SEC’s online public database. However,
as discussed in Section
1.6, EGCs may confidentially submit certain IPO registration
statements to the SEC. In 2017, the SEC extended a similar benefit to non-EGCs,
allowing them to also voluntarily submit draft IPO registration statements to
the SEC staff for nonpublic review. The ability to file nonpublicly is a
significant benefit because it allows companies to keep potentially sensitive
information from customers or competitors until later in the IPO process. It
also lets companies, on a nonpublic basis, respond to SEC comments, update the
draft registration statement, and continue to assess market conditions
throughout the IPO process. Companies that use this benefit can also delay or
withdraw the IPO, if desired, without public scrutiny.
While draft registration statements may be initially submitted nonpublicly, a
company will eventually be required to publicly file all previously submitted
drafts unless it elects to withdraw the IPO. Specifically, all comments and the
related responses, even if they were previously submitted nonpublicly, will be
posted to the SEC’s Web site no earlier than 20 business days after the
registration statement is declared effective. All nonpublic submissions of 1933
Act registration statements must be filed publicly4 no later than 15 days before (1) a road show or (2) the requested
effective date of the registration statement if no road show is planned.
Connecting the Dots
In the answer to Question 1 of its FAQs on the voluntary submission of
draft registration statements, the SEC staff states, in part:
The confidentiality provisions of Securities Act
Section 6(e)(2) are limited to certain draft registration statements
of Emerging Growth Companies. An issuer relying on the Division’s
policy should consider requesting confidential treatment under Rule
83 (17 CFR 200.83) for its draft registration statement and
associated correspondence when seeking a nonpublic review.
As a result, “confidential” draft registration
statements are reserved for EGCs. Other issuers may submit draft
registration statements “nonpublicly” and request that they be given
confidential treatment.
When submitting a draft registration statement for nonpublic review, companies
should consider the following:
- The draft registration statement must be “substantially complete.” It must contain a signed audit report from the company’s independent registered public accounting firm and meet all line item requirements applicable to the registration statement, unless a company is using certain permitted accommodations for omitting otherwise required information.5 Also, we understand that the SEC staff expects the lead underwriter to be named in the draft registration statement for a traditional IPO and may defer its review until a lead underwriter is identified.
- For a draft registration statement, companies do not need to include items such as the required signatures of executives and directors, the auditor’s consent, and the filing fee.
At the time of a company’s initial public filing, the registration statement should be:
- Devoid of any indications that the document is nonpublic.
- Complete (e.g., it should include signatures, signed audit reports, consents, exhibits, and any required filing fees).
- Accompanied by the contemporaneous filing of any previously submitted nonpublic draft registration statements.
Footnotes
4
For 1934 Act statements, the registration statement must
be filed no later than 15 days before the expected effective date of the
registration statement.
5
See Question 101.05 of the
SEC’s Compliance and Disclosure Interpretations (C&DIs) on
Securities Act forms.