Merger discussions… to disclose or not to disclose

We’ve all read the stock trailers across the bottom of MSNBC “..after the acknowledgment of merger talks, the company’s shares jumped $9.35 yesterday, to $24.50, more than double the closing price of…  

Working with virtual data room (M&A) clients, one issue that arises quite often is “when does a company need to disclosure their merger discussion? When is the information material?”

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Our answer comes in two parts – one a firm and concrete response, the other a vague-ish, common-sense-ish directional response:

  • Ask your counsel
  • A merger is material and the timing for corporate disclosure of material information is left to the good faith business judgment of management.

Firstly, we know that the SEC’s core definition of material information is the widely acknowledged “total mix of information” test. Under the total mix test, companies need to ask themselves whether there is a substantial likelihood that a reasonable investor would have viewed the misrepresented information, or disclosure of omitted fact(s), as having significantly altered the “total mix” of information available to the investor.

In plain English: A fact is material if a reasonable person would consider that fact important when deciding whether to buy or sell shares of stock.  

In the past, issuers have tried to define a hard edge for merger materiality, but the courts rejected any bright-line rule that preliminary merger discussions do not become material until an “agreement-inprinciple” has been reached. Instead, the court developed a “probability versus magnitude” approach to materiality. This approach requires the working group to make a fact-specific inquiry to assess the materiality of the merger’s negotiation. If the acquisition is meaningful to the company on all financial levels, then the probability of the transaction being consummated must be considered high. If there is a low probability that the transaction will occur, the need for disclose decreases despite the significance of the transaction. Likewise, although the probability of a transaction may be high, if its impact on the company, i.e. its magnitude, is low, the need for disclosure is also low. 

When determining the timing for disclosure of material information on corporate M&A, management must find balance between keeping its investors informed while guarding competitive information. This balance is possible to achieve if, before the merger talks even began, management has strictly adhered to its well-practiced RegFD policies and procedures… “no comment.”

Click here to download our 5 Stages of M&A quick guide

Click here to download our Five Stages of M&A quick guide

As investor relations departments know well, absent the affirmative duty to disclose, a company does not have an obligation to disclose material non-public information. In other words, a company is not required to disclose information as soon as it arises simply because it is material. Silence, absent a duty to disclose, is not misleading under Rule 10b-5.

When no circumstances are present that require immediate disclosure, the timing for disclosure of material information is left to the good faith business judgment of management. This is the 50 shades of RegFD investor relations breathes each and every day. Make sure the IRO is in the M&A working group.

And, it goes without saying, we’d be pleased to be your vendor-of-choice for your shareholder disclosure, both across the wire and with the SEC.

…Tuesday, Wednesday, Kudosday…

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If you work in the corporate compliance and securities law niche, you know clients are very close-to-the-vest in regard to “testimonials.” That said, our staff gets a lot of praise daily – and we can’t not share the good news (anonymized for privacy). Sales can offer you full named references.

Here are this week’s: 

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Kudos to our Transactions team

You guys are awesome, thank you!!!

Your folks hit it out of the park. Rich Unger has been amazing. I don’t think there were any mistakes by the production team. Frankly, I had no idea you guys could provide this level of service.  The whole process has been easy.

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.Kudos to our XBRL team

Excellent job coordinating last minute changes by CS and typesetting, EDGAR team checking submission and contacting client and coordinating with Paul and XBRL team and loading XBRL into project last minute.

We deal with [ LAW FIRM ] and have always have had a great relationship with them but this is from the parent company / the bill payer. Thanks everyone for the hard work to get this filed on time today. Wow – thank you! .

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.Kudos to our Entire team

Thank you for ALL of your help over the past couple of weeks. You guys have been amazing.

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.Kudos to our EDGAR team

Vintage Team! First, let me say THANK YOU!  I am not sure what strings you had to pull to make this happen but it is greatly appreciated! To be able to take our request/problem and turn around production in less than 24 hours is truly impressive.

I cannot thank you enough for all of your hard work and your commitment to helping us with this situation that was not caused by either of us. This is truly customer service at its best. Thank you again for all your help and your partnership! I hope you all have a great day!

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.Kudos to our EDGAR team

I would like to thank you and your team for the incredible services that you provided today. We were struggling with our timeline for the filing of our 10-k and you pulled some impressive tricks to expedite the process on your side. Thanks again for your work.

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Thanks to our experts for delivering intelligent value!

The success of confidential IPO filings is no secret

confidentYesterday, the WSJ’s always-excellent Emily Chasan wrote a smart piece regarding the JOBS Act’s confidential IPO provision’s effect on M&A.

This JOBS provision created a confidential SEC review procedure for IPO registration statements of “emerging growth companies” prior to their first registered sale of common equity. Generally, an emerging growth company is an issuer that has less than $1 billion in total annual gross revenues.

The phrase “confidential” is misleading, particularly in an industry that is dedicated to transparency. “Confidential” tends to bring up imagery of James Bond, insider whispers, dark pool trading and pump-n-dump ninjas.

Nothing of the sort. With a confidential IPO registration, all draft IPO registration statements and subsequent amendments are filed with the SEC for non-public review. Like all S-1 files we submit for clients, the SEC is carefully reviewing the filing.

CLICK HERE FOR A WHITEPAPER ON THE S-1 FILING PROCESS WORKFLOW

Although a company’s S-1 paperwork may be for the SEC’s eyes only, their intention to hold an IPO is not a secret – and that certainly flags them looking for an exit.

Per Emily:

The law forbids the Securities and Exchange Commission from publicly releasing the names of companies that file confidentially for IPOs. But it doesn’t preclude the companies themselves from disclosing that information, or selectively telling potential buyers about their confidential IPO filings, if they choose to do so.

Since the owners of a company preparing to go public want to monetize their investment, the very existence of the confidential filing can accelerate a sale process for a company, and ultimately lead to a less risky outcome for private-equity and venture-capital investors, who can get paid in one fell swoop once an acquisition closes.

In all, the SEC has received stealth IPO filings from about 850 companies in the past three years through June 30, it says… However, only 479 of those filings actually led to an IPO, according to Dealogic, a research firm.

So, IPOs are down 33% this year compared to last – but thanks to the confidential filing process, the “testing the waters” element of the process – once thought to eliminate the media frenzy and market speculation (and breathing room) of an IPO – also means hanging up a “For Sale” sign as a signal to a possible acquirer in this M&A-rich environment.

CLICK HERE FOR THE 5 STAGES OF M&A GUIDE CHART

Vintage clients have the pleasure of burning the “great service” candle at both ends here – beginning with the S-1 filing and ending with the virtual data room management. 

Success needs elbow room! (Vintage expands with new Denver office)

This month, Vintage is celebrating the one year anniversary of the evolution of our brand and, more importantly, the evolution of our people, processes and in some cases – our fee structure. At the apex of this month of jocularity is the move to our new, bright and shiny offices in downtown Denver, CO.

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Vintage offices will open August 3 at 1515 Wynkoop Street, Denver, Colorado 80202

In addition to the EDGAR, XBRL and investor relations-centric support, our new offices will be the Mountain timezone hub for in-house drafting sessions for IPO registrations  an important (new and convenient) resource for many Denver start-ups. Having our own Denver conference spaces will streamline their processes and ease some of their costs.

What we have accomplished since the new brand evolution:

  • Our number of transactions has increased – with a close-to-equal balance between OTC Markets, NYSE and NASDAQ-listed issuers
  • Our VDR, Vintage Data Room power by EthosData, has been awarded 2015 Virtual Data Room Rising Star by Acquisition International’s 2015 M&A Awards
  • We have expanded office and conference rooms for effective in-house drafting sessions
  • We are, once again, the #1 SEC filing / newswire and the #3 for overall filer by volume
  • Vintage is a founding member of the XBRL US Center for Data Quality
  • We offer complete investor relations services including IR websites

“Intelligent Value” has become the new reputation of Vintage: fast turns, uncomplicated billing and superior client service.

LINKS TO REVIEW

  • XBRL US Center for Data Quality details HERE
  • NYC office video tour HERE
  • 5 Stages of M&A worksheet HERE

Thank you for your continued and expanding trust of Vintage, our client support teams and our culture of accuracy.

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IPOs and Transactions: July 20 – 24

There were 44 transactions filed with the SEC last week.

Congratulations to all of the corporations and law firms that selected our transactions services last week including Cytosorbents Corp. w/ DLA Piper LLP, Seguin Natural Hair Products Inc. w/ Ellenoff Grossman & Schole LLP and Transgenomic Inc. w/ Paul Hastings LLP

We appreciate that they selected to work with us and we’re pleased that they found us to be the intelligent value.

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Law firm / Advisor Registrant Symbol Form Exchange
Alston & Bird LLP HALYARD HEALTH, INC. HYH S-4 NYSE
Armstrong Simpson NATCORE TECHNOLOGY INC. ~ F-1 ~
Baker Botts L.L.P. EQT MIDSTREAM PARTNERS, LP EQM S-3 NYSE
Briggs and Morgan, P.A. CACHET FINANCIAL SOLUTIONS, INC. CAFN S-1 OTC Markets
Brunson Chandler & Jones PLLC BIRDBILL, INC. ~ S-1 ~
Cleary Gottlieb Steen & Hamilton LLP CITIZENS FINANCIAL GROUP INC/RI CFG S-1 NYSE
Cleary Gottlieb Steen & Hamilton LLP CITIZENS FINANCIAL GROUP INC/RI CFG S-1 NYSE
Clifford Chance US LLP VAN ECK OVERLAND ONLINE FINANCE TRUST ~ N-2 ~
Cooley LLP MINERVA NEUROSCIENCES, INC. NERV S-3 NASDAQ
Cravath, Swaine & Moore LLP NEW BUSINESS NETHERLANDS N.V. ~ F-1 ~
Davis Polk & Wardwell LLP FIRST DATA CORP ~ S-1 ~
Davis Polk & Wardwell LLP VIZIO, INC. ~ S-1 ~
Davis Polk & Wardwell LLP CITIZENS FINANCIAL GROUP INC/RI CFG S-1 NYSE
Davis Polk & Wardwell LLP CITIZENS FINANCIAL GROUP INC/RI CFG S-1 NYSE
Dechert LLP VAN ECK OVERLAND ONLINE FINANCE TRUST ~ N-2 ~
Dentons US, LLP NOVA LIFESTYLE, INC. NVFY S-3 NASDAQ
Disclosure Law Group VISTAGEN THERAPEUTICS, INC. VSTA S-1 OTC Markets
DLA Piper LLP ARALEZ PHARMACEUTICALS LTD ~ S-4 ~
DLA Piper LLP CYTOSORBENTS CORP CTSO S-3 NASDAQ
Duane Morris LLP MELA SCIENCES, INC. /NY MELA S-3 NASDAQ
Ellenoff Grossman & Schole LLP SEGUIN NATURAL HAIR PRODUCTS INC. ~ S-1 ~
Ellenoff Grossman & Schole LLP LINGERIE FIGHTING CHAMPIONSHIPS, INC. BOTY S-1 OTC Markets
Faegre Baker Daniels LLP WASHINGTON PRIME GROUP, L.P. ~ S-4 ~
Fried, Frank, Harris, Shriver & Jacobson LLP SHAKE SHACK INC. SHAK S-1 NYSE
Gewerter & Dowling DAS ACQUISITION INC. ~ S-1 ~
Goodwin Procter LLP AMARIN CORP PLC\UK AMRN S-3 NASDAQ
Gracin & Marlow, LLP ANDALAY SOLAR, INC. WEST S-1 OTC Markets
Hydrolix, Inc. HYDROLIX, INC. ~ S-1 ~
IMC Holdings, Inc. IMC HOLDINGS, INC. ~ 10-12G ~
Kirkland & Ellis LLP LADDER CAPITAL CORP LADR S-3 NYSE
Latham & Watkins LLP VIZIO, INC. ~ S-1 ~
Latham & Watkins LLP SHAKE SHACK INC. SHAK S-1 NYSE
Law Office of Andrew Coldicutt IWEB, INC. ~ S-1 ~
Law Offices of Joseph Lambert Pittera AXIS RESEARCH & TECHNOLOGIES, INC. ~ S-1 ~
LoPresti Law Group, P.C. NATCORE TECHNOLOGY INC. ~ F-1 ~
Matthew C. McMurdo, Esq. FRANCHISE HOLDINGS INTERNATIONAL, INC. FNHI S-1 OTC Markets
Park Place Energy Inc. PARK PLACE ENERGY INC. ~ S-4 ~
Paul Hastings LLP TRANSGENOMIC INC TBIO S-3 NASDAQ
Procopio, Cory, Hargreaves & Savitch LLP CANNAVEST CORP. CANV S-1 OTC Markets
Raines Feldman LLP AETHLON MEDICAL INC AEMD S-1 NASDAQ
Sanders Ortoli Vaughn-Flam Rosenstadt LLP TAPIMMUNE INC TPIV S-1 OTC Markets
Securities Compliance Group, Ltd. VOICE LIFE INC ~ S-1 ~
Sichenzia Ross Friedman Ference LLP SITO MOBILE, LTD. SITO S-1 OTC Markets
Silver, Freedman, Taff & Tiernan LLP EMCLAIRE FINANCIAL CORP EMCF S-3 OTC Markets
Simpson Thacher & Bartlett LLP FIRST DATA CORP ~ S-1 ~
Skadden, Arps, Slate, Meagher & Flom LLP INVESCO DYNAMIC CREDIT OPPORTUNITIES FUND ~ N-2 ~
Skadden, Arps, Slate, Meagher & Flom LLP INVESCO HIGH INCOME TRUST II ~ N-2 ~
Skadden, Arps, Slate, Meagher & Flom LLP INVESCO SENIOR INCOME TRUST ~ N-2 ~
Skadden, Arps, Slate, Meagher & Flom LLP GENESIS HEALTHCARE, INC. GEN S-3 NYSE
Stevens & Lee TWO RIVER BANCORP TRCB S-3 NASDAQ
Sullivan & Cromwell LLP NEW BUSINESS NETHERLANDS N.V. ~ F-1 ~
The Doney Law Firm MYDX, INC. MYDX S-1 OTC Markets
Tucker Ellis LLP CIVISTA BANCSHARES, INC. CIVB S-3 NASDAQ

Post IPO, thousands of organizations count on us to assure regulatory compliance and target new investors.

Click here and opt-in to receive this weekly summary via email.

Click here to review the week’s underwriters.

Have a great week.

IPO Underwriters of the Week: July 20 – 24

Congratulations to the corporations and underwriters that worked with our transaction services team. Whether in-house, your-house or 100% virtual… click here to discover why we are the intelligent value for both traditional and confidential IPOs.

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Registrant Form Underwriter 1 Underwriter 2 Underwriter 3 +
NATCORE TECHNOLOGY INC. F-1 Dutchess Opportunity Fund, II, LP LoPresti Law Group, P.C. ~
SHAKE SHACK INC. S-1 J.P. Morgan Securities LLC Morgan Stanley & Co. LLC Barclays Capital Inc. / Goldman, Sachs & Co. / Jefferies LLC / William Blair & Company, L.L.C. / Stifel, Nicolaus & Company, Inc.
CITIZENS FINANCIAL GROUP INC/RI S-1 Merrill Lynch, Pierce, Fenner & Smith Inc. ~ ~
VIZIO, INC. S-1 Merrill Lynch, Pierce, Fenner & Smith Inc. Deutsche Bank Securities Inc. Citigroup Global Markets Inc. / BMO Capital Markets Corp. / Piper Jaffray & Co. / Wells Fargo Securities, LLC / Roth Capital Partners, LLC
CITIZENS FINANCIAL GROUP INC/RI S-1 Morgan Stanley & Co. LLC ~ ~
CANNAVEST CORP. S-1 Redwood Management, LLC ~ ~
ANDALAY SOLAR, INC. S-1 Southridge Partners II LP ~ ~
VAN ECK OVERLAND ONLINE FINANCE TRUST N-2 UBS Securities LLC ~ ~
NEW BUSINESS NETHERLANDS N.V. F-1 UBS Securities LLC Merrill Lynch, Pierce, Fenner & Smith Inc. Santander Investment Securities Inc.

Post IPO, thousands of organizations count on us to assure regulatory compliance and target new investors.

Have a great week.

Vintage joins with four competitors to form the XBRL US Center for Data Quality

XBRL US and an alliance of five top XBRL companies (alphabetical) – Merrill Corporation, RDG Filings, RR Donnelley, Vintage, a division of PR Newswire (Ta-da!), and Workiva Inc. – form the XBRL US Center for Data Quality to improve the utility of XBRL financial data filed with the U.S. Securities and Exchange Commission (SEC).

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Dogs and cats living together? Definitely. However, the only mass hysteria with the XBRL US Center for Data Quality is that it was not executed sooner. Kudos to XBRL US for creating this “bipartisan consortium” to address XBRL quality at the base, practitioner level… not just for our clients but for all filers. XBRL quality and subsequent database is an all-in scenario. Quality must be full market for Street adoption.

In addition to representatives from the founding members, the Center for Data Quality, the committee includes representatives from Bloomberg, Credit Suisse HOLT, Calcbench, CFA Institute, S&P Capital IQ, Vanderbilt University and the American Institute of CPAs.

“To realize the full economic benefit of XBRL, investors and other consumers must have access to accurate and reliable XBRL data,” said Barry Melancon, CEO of the American Institute of CPAs, and Chair of the XBRL US Board of Directors. “This industry-funded initiative will make it substantially easier for companies to create consistent, good quality financial statements in XBRL format.”

The Committee is responsible for developing guidance and validation rules that can prevent or detect inconsistencies or errors in XBRL data filed with the SEC with key activities to include:

  • Developing unambiguous guidance on how to tag financial data using XBRL and freely available, automated validation rules to verify compliance with its guidance and to prevent or detect tagging errors.
  • Obtaining input through public exposure of its proposed guidance and validation rules for a sixty day period and incorporating the input, as appropriate, in the final approved guidance and validation rules.
  • Providing progress updates to SEC staff and input to FASB staff to aid in simplifying and improving the US GAAP Taxonomy.

The first public review contains seven proposed validation rules that test selected attributes reported for over 2,400 individual elements and certain broad classes of elements. Below are the rules developed by the Data Quality Committee responsible for developing guidance and validation rules that can prevent or detect inconsistencies or errors in XBRL data filed with the SEC and focuses on data quality issues that adversely affect data analysis. Click on the links to review and comment.

Element Values Are Equal

  • Assets equal liabilities plus shareholders’ equity. 

Context Dates After Period End Date

  • Dates that end after reporting period end dates are limited to subsequent events, forecasts and Entity Common Stock, Shares Outstanding.

DEI and Block Tag Date Contexts

  • Document and entity information, footnotes, tables, and accounting policy concepts must use reporting period dates that are consistent with the fiscal period focus of the filing (e.g. Q1, Q2, Q3 or FY).

Element A must be less than or equal to Element B

  • Value for element A should be less than or equal to the value for element B. Documentation includes a list of elements where this comparison is tested.

Negative Values

  • Elements that should not be reported with negative values. Documentation includes a list of elements tested.

Document Period End Date Context

  • Document and entity information dates should match the document period end date.

Document Period End Date Context / Fact Value Check

  • The document period end date should match the date tagged with the document period end date element.

Comments received during the 60-day public review period will be evaluated for incorporation into final rules that will be made freely available and will be contributed to the open source Arelle XBRL platform. Anyone can benefit from this work… not just clients of the top five providers.

Do we have a vested, biased and financial interest in the success of XBRL… of course we do. That said, if you have ever attended a national or international gathering of XBRL practitioners (uber-accountants) – you’ll soon understand the importance and possibilities a global consistent view at company reporting will deliver to investors.

And for issuers? Your quarterly earnings are directly fed into the data stream directly from you. You become the single source for your numbers.