New Chairman of the Security and Exchange Commission (SEC), Walter J. Clayton, wants to encourage more companies to go public allowing them to file registration statements confidentially. How will it affect the market?
From July 10, 2017, Clayton will allow all companies that decide to go public or make secondary offerings of publicly-traded stocks in the first year after the IPO to file a "draft" version of their statements and iron out any wrinkles in their reporting with the regulator privately. The companies will not be obligated to release the formal version of statements right away anymore and can keep details of their finances and business strategies under wraps until 15 days before they go on "road shows".
This measure is taken to increase the total number of companies listed on the United States stock market that has plunged by nearly half from a peak of 7,322 publicly traded companies in 1996, according to research by Credit Suisse.
Kathy Chiu, Managing Partner @ FAN Fund suspects, that this expansion of regulation will have little impact on encouraging the IPO market: "First of all, for companies with revenues under $1 Billion, this is already the regulation since 2012 JOBS act, so this new rule doesn't really impact many companies except for fairly mature ones..."
...Judging by the amount of money unicorns have raised so far, perhaps they don’t need to do a conventional IPO at all. Some of them are believed to be avoiding IPO because it requires transparency of their likely unattractive statements. This raises another question: why markets regulators are emphasizing secrecy over openness?
Let's see what Michael Halloran, ex-Counselor to the Chairman of SEC (Chairman Christopher Cox), partner at Halloran Farkas + Kittila LLP, and one of the educators of VC Academy has to say: "...The whole thing is no big deal from a regulatory secrecy standpoint, because you still have to come out from under the covers, announce you are going public, 15 days before you start the roadshow or get the public offering effective. Looking deeper, this regulation gives companies lots of other advantages, like not subjecting your filing to freedom of information act requests for information on things you try to file confidentially, not letting analysts or short sellers tear down your company early on, etc."
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