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 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. 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 the paragraphs below,
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 for more information regarding SPACs.