United States

WHAT'S THE DEAL?

Initial Public Offerings: Filing and Post-Filing Period

Here's the deal:

Filing the registration statement is a crucial part of an initial public offering ("IPO"), and during the filing period the company must engage with the SEC Staff and respond to its comments with responsive amendments.
After the preliminary prospectus has been distributed, the company should be prepared to complete its road show, marketing the proposed IPO.
Once the registration statement is finalized, the company, underwriters and the other parties will need to prepare for the pricing and closing of the offering, which will typically take place in the two weeks after the commencement of the road show.
Throughout the IPO process, a company should carefully consider what information is included in the registration statement in order to avoid material misstatements or omissions of fact in the registration statement, which may give rise to liability under the Securities Act.

What's the Deal?

One of the most important steps in completing an IPO is publicly filing the registration statement, marking the commencement of the post-filing period. Within the post-filing period, there is the pre-effective period, or "waiting period," which refers to the period from the date of filing of the registration statement to its "effective date." Subsequently, the post-effective period is the period from the date the registration statement has been "declared effective" by the Securities and Exchange Commission ("SEC") to the completion of the offering.

Pre-effective Period

During the pre-effective period, a company is permitted to make oral offers and certain written offers, but may not enter into binding agreements to sell the offered security. During the waiting period, marketing will typically begin, subject to the limitations of the Securities Act of 1933, as amended (the "Securities Act"). Once the SEC Staff comments on the registration statement have been resolved, or it is clear that there are no material open issues, the company and its underwriters will undertake a one- to two-week "road show" during which company management will meet with prospective investors. The length of the road show will vary depending on many factors. Underwriters commonly arrange for a number of test-the-waters meetings with potential institutional investors with the company. Often the underwriters will advise the company to delay a public filing of the registration statement until the underwriters have received positive feedback from these test-the-waters meetings. The test-the-waters meetings may limit the need for a long road show. Also, for a smaller offering, the road show may be shorter than for a larger offering, and may be limited to domestic meetings. Of course, as a result of the COVID-19 pandemic, many road shows are taking place virtually.

After the underwriters have assembled indications of interest for the offered securities, the company and its counsel will request that the SEC declare the registration statement "effective" at a certain date and time, usually after the close of business of the US securities markets on the date scheduled for pricing of the IPO.

The Filing Process and SEC Review

The SEC's review of the registration statement is an integral part of the IPO process. Once a registration statement is filed, a team of SEC Staff members is assigned to review the filing. The team consists of accountants and lawyers, including examiners and supervisors. The SEC's objective is to assess the company's compliance with its registration and disclosure rules. In addition to assessing compliance with applicable requirements, the SEC considers the disclosures through the eyes of an investor in order to determine the type of information that would be considered material to an investor. The SEC's review is not limited to just the registration statement. The SEC Staff will closely review websites, databases, and magazine and newspaper articles, looking in particular for information that they think should be in the prospectus or that contradicts information included in the prospectus.

The review process is time-consuming. The review depends on the complexity of the company's business and the nature of the issues raised in the review process. Initial comments on Form S-1 are provided in about 30 days-depending on the SEC's workload and the complexity of the filing, the receipt of first-round comments may take longer. The SEC Staff generally tries to address response letters and amendments within 10 days, but timing varies considerably. This timing is the same whether the registration statement is filed publicly or submitted confidentially.

Registration Statement

A registration statement contains the prospectus, which is the primary selling document, as well as other required information, written undertakings of the issuer and the signatures of the issuer and at least a majority of the issuer's directors. It also contains exhibits, including basic corporate documents and material contracts. US companies generally file a Form S-1 registration statement, while most non-Canadian foreign private issuers use a Form F-1 registration statement, although other forms may be available. There are also special forms available to certain Canadian companies. A registration statement is filed electronically with the SEC through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. Before the company can file via the EDGAR system, it must create an account with the SEC by obtaining a Central Index Key ("CIK") number and associated security codes. The CIK number is a unique number assigned to individuals and companies who file reports with the SEC. Once the company files the registration statement via the EDGAR system, it becomes publicly available.

In addition to a registration statement, a company is required to file certain exhibits with the registration statement, including its certificate of incorporation, bylaws, material agreements (including the underwriting agreement) and consents of experts. Since information filed via the EDGAR system with the SEC will be publicly available, if the company wants to keep any information confidential, it must file redacted versions of the exhibits with the SEC. Redactions should be based on information that may involve trade secrets or commercial or financial information that could harm the company competitively if disclosed to the public.

Financial Information Included in the Registration Statement

As part of filing the registration statement, the SEC rules require the following information in the prospectus of an issuer:

Audited balance sheets as of the end of the issuer's last two fiscal years;
Audited statements of operations, statements of cash flows, statements of comprehensive income and statements of changes in shareholders' equity of the company's last three fiscal years, or two years in the case of an emerging growth company ("EGC"); and
Depending on the length of time from the end of the last fiscal year and the date of filing, an unaudited balance sheet for the most recent fiscal interim period and statements of operations, statements of cash flows and statements of changes in shareholders' equity for the interim period and for the corresponding period of the prior fiscal year.

These statements must be prepared in accordance with US GAAP or IFRS in accordance with the IASB, and they will be the source of information for "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A"). In addition, a prospectus may contain audited and unaudited financial statements relating to acquisition of assets and companies as well as pro forma financial information giving effect to the acquisition.

The SEC will review and comment on the financial statements and the MD&A. The SEC's areas of particular concern are:

Revenue recognition;
Business combinations;
Segment reporting;
Financial instruments;
Impairments of all kinds;
Deferred tax valuation allowances; and
Compliance with debt covenants, fair value and loan losses.

Companies and their auditors should also review their accounting policies and potential areas of concern before filing the registration statement. The SEC encourages discussions with its accounting staff of accounting concerns early in the preparation process, thus avoiding potential problems once the registration statement is filed and publicly available.

Prospectus

The prospectus describes the offering terms, the anticipated use of proceeds, the company, its industry, business, management and ownership, and its results of operations and financial condition. Although it is principally a disclosure document, the prospectus is also crucial to the selling process.

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What's The Deal? - Initial Public Offerings: Filing And Post-Filing Period

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