Experts believe many more companies have filed confidentially but have yet to announce their intentions to go public.
Supporters and detractors of President Obama’s Jumpstart Our Business Startups (JOBS) Act will have a lot to debate next year as more companies than expected appear to be taking advantage of the provision of the bill that allows companies to file initial public offerings confidentially with the SEC.
According to Renaissance Capital, more than a third of the 35 companies that had filed initial public offerings since the JOBS Act went into affect in April through August 24 chose to use a provision of the bill that allows companies to file confidentially with the SEC before widely announcing their intention to seek investment capital from the financial markets. Supporters of the bill argue that confidential filings allow companies to make efforts to comply with SEC rules for going public without fear of being hurt by news they made mistakes during the process or had to withdraw. Jonathan Guest, partner at law firm McCarter & English, told Corporate Secretary in June: ‘A company could undertake a public offering and go through with it if it is successful, or stop and not have the public be aware.’
Experts believe many more companies have filed confidentially but have yet to announce their intentions to go public. The surge in confidential filings suggests the act is at least encouraging smaller companies to explore seeking expansion funding from the capital markets.
Why is this important for governance? The corporate secretary and general counsel at companies considering an IPO will have to assist the board not only in making the all-important decision whether or not to go public, but also in deciding whether or not it is better to file confidentially. Does filing confidentially protect the interests of all stakeholders in the company? It appears many companies believe it does, which from a governance standpoint would be a plus.
Of course, deciding to file confidentially doesn’t guarantee that the original decision to file an initial public offering was right. Only the success of the deal can do that. Of the 13 confidential filers through August, four have priced their IPOs, one postponed and eight are still waiting to launch. The hope is that filing confidentially will help companies get everything in order, which will increase their chances of success.
Any company considering an IPO can increase its chances of success by joining IR Magazine’s editor-at-large Neil Stewart, who is moderating a webinar series, ‘Is an IPO right for you?’. The four-part series, hosted by FTI Consulting, covers many different aspects of going public, such as the current IPO landscape, the pros and cons of listing, and how to build the business case for filing. Find out more about the webinar series, ‘Is an IPO right for you?’.
