August 29, 2017
On August 17, 2017, the SEC’s Division of Corporation Finance issued guidance further extending an important accommodation provided to companies contemplating going public. Under the updated guidance, all issuers, including those that do not qualify as emerging growth companies (EGCs), would be permitted to omit from confidential draft registration statements interim financial statements and related financial information (including management discussion and analysis (MD&A) disclosure) that they reasonably believe will not be required to be included at the time the registration statement is publicly filed, or, for EGCs only, at the time of the contemplated offering. The Division of Corporation Finance had previously provided this accommodation with respect to annual financial statements and related financial information. This accommodation does not extend to registration statements that are filed publicly on EDGAR. As a reminder, the submission of confidential draft registration statements prior to public filing is available for initial registrations and for follow-on registrations within 12 months of the effectiveness of the initial registration. Please see our earlier client publication, SEC to Permit Confidential Submission of Draft Registration Statements for All IPOs and Spin-Offs, Including by Non-EGCs, for more information.
Under this guidance, a calendar year-end issuer that submits a confidential draft registration statement in November 2017 and reasonably believes it will first publicly file (or launch its offering, if an EGC) in April 2018 may omit its interim financial information for the nine months ended September 30, 2017 and 2016, along with omitting annual financial information for 2014 (and 2015, if an EGC). This is because none of the omitted financial information would be required at the time of its first public filing (or launch of its offering, if an EGC) in April 2018.
This announcement is the latest of what is expected to be a number of reforms and SEC staff policy changes designed to streamline the IPO process and enhance capital formation in public markets that SEC Chairman Jay Clayton has said is an important objective of the agency. This development is expected to allow companies to submit registration statements faster and reduce the cost of the registration process by eliminating the need for the preparation of financial statements and other financial information and auditor reviews of information that will ultimately not be included in a registration statement. Companies, however, should bear in mind that giving the SEC staff an opportunity to review recent MD&A disclosure and financial statements earlier in the registration process can also have benefits. Drawing out SEC questions and concerns at an earlier stage allows more time for such comments to be addressed. This can potentially prevent these comments from being raised later in the review process when they can have a real impact on transaction timing.