Chapter 2 — Identifying the Required Financial Statements for the Registration Statement

2.2 Registrant Financial Statements

The first step in determining the financial statement requirements in an IPO is to determine the registrant. The registrant is typically the legal entity that is issuing securities in the IPO and filing the registration statement. Further, after the IPO, the registrant will need to comply with the ongoing public reporting requirements (e.g., annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K), as described in Chapter 7.

In many cases, an existing operating entity may proceed with an IPO in its current legal form and would be identified as the registrant. Alternatively, the existing operating entity may undergo a corporate reorganization before filing an IPO registration statement or before becoming a registrant. In other situations, a recently organized entity may be formed as the registrant, and there may be a plan to combine it with one or more operating entities before an IPO. All of these factors can affect which reporting entities’ financial statements are required in the IPO.

Although the registrant’s financial statements generally should be included in the IPO registration statement, sometimes they will not be sufficient on their own. An entity may need to carefully evaluate the formation, history, and legal structure of the entities or businesses involved in the IPO to determine which financial statements are required. For example, an entity may need to consider recently organized registrants (see Section 2.2.1), predecessor entities (see Section 2.3), carve-outs of existing legal entities (see Section 2.3.1), and “put-together” or “roll-up” transactions (see Section 2.3.2), all of which are discussed in more detail below.

2.2.1 Recently Organized Registrant Financial Statements

A recently organized entity (sometimes referred to as a shell company) with few or no historical operations may be formed as the registrant to acquire one or more operating companies upon or before the consummation of its IPO.

Generally, the financial statements of a recently organized registrant must be presented in the IPO registration statement even if it has no historical operations. In these cases, an audited “seed money” balance sheet of the newly formed registrant is presented, typically as of the date of incorporation, to show the initial capitalization of the entity. Statements of operations, comprehensive income, and cash flows may be omitted if there has been no activity other than the formation transaction. However, such financial statements must still comply with the form, content, and updating requirements of Regulation S-X. In some circumstances, such as when the registrant is capitalized on a nominal basis, a recently organized registrant’s financial statements may be omitted from a filing; in such cases, the registrant would provide a statement indicating that the recently organized entity has not commenced operations and has no (or nominal) assets or liabilities. For more information, see Section 1160 of the FRM. Further, paragraph 1220.4 of the FRM prescribes the related age requirements for situations in which a recently organized registrant’s financial statements are provided. When a recently organized registrant’s financial statements are included in an IPO filing, additional predecessor financial statements, as described in Section 2.3, will almost always be required.

One type of shell company is a SPAC, which is a newly created company that raises cash in an IPO to fund the acquisition of one or more private operating companies within a specified period. Generally, the companies to be acquired will not be identified until later and the financial statements of the operating companies therefore are not included in the IPO of the SPAC. Financial statements of the operating companies will be included in a post-IPO filing. See Section 1.7.1 and Appendix D for more information regarding SPACs.