On July 21, we celebrated the sixth birthday (anniversary?) of Dodd-Frank, and although some of the ruling’s initiatives are less than beloved by many, aka Volcker Rule, the “confidential IPO” bucketed under the JOBS Act has been an undisputed success.
I was reminded of this when reviewing last week’s list of companies who officially became “issuers.” All three were Emerging Growth Companies (EGC) and all three filed as a confidential IPO.
- Airgain (wireless telecommunication equipment) filed confidentially as an EGC in Aug 2014, filed publicly in Jul 2016, raised $12m – priced below the range – traded on the NASDAQ on Aug 12
- Protagonist Therapeutics (biopharmaceuticals) filed confidentially as an EGC in May 2016, filed publicly in Jul 2016, raised $90m – priced within the range – traded on the NASDAQ on Aug 11 and finished the day down 3%
- Medpace (clinical contract research company) filed confidentially as an EGC in Mar 2016, filed publicly in Jun 2016, raised $161m – priced within the range – traded on the NASDAQ on Aug 11 and finished the day up 21%
What is: Emerging Growth Company
An Emerging Growth Company (EGC) is an issuer that has total annual gross revenues of less than $1 billion during its most recently completed fiscal year.
What is: Confidential filing process
An Emerging Growth Company can submit a confidential draft IPO registration to the SEC for review in advance of its initial public offering. This allows the company to hone their message and offering – especially with the SEC.It allows the company to change their mind about going public without anyone knowing. Publicly “pulling their IPO” is often viewed as a failure.
The EGC and SEC are prohibited from publicly disclosing the confidential filing, comments, and amendments during this review process. As the EGC moves closer toward its IPO, the JOBS Act requires that these filings be made available to the public.
The EGC would be required to publicly file their draft registration and amendments, with the SEC no later than 15 days before its roadshow. Plus the SEC staff will publicly release its comment letter and responses to staff comment letters on confidential draft submissions after the registration statement for the IPO becomes effective but no sooner than 20 days after the effective date.
As you see in the three companies above, confidential does not equate to simple. Airgain needed two years to get into position.
What is: IPO Compliance Requirements
|IPO requirement||Traditional IPO registrant||ECG JOBS Act|
|Audited financial statements||3 Years||2 Years|
|Selected financial data||5 Years||2 Years|
|Executive compensation disclosures||Full||Equal to smaller reporting companies disclosures|
What about: XBRL
The JOBS Act does not exempt EGCs from complying with the tagging requirements established by the XBRL requirements applicable to SEC registrants.