The Jumpstart Our Business Startups (JOBS) Act of 2012 ushered in a very popular alternative for “emerging growth companies” going public and those utilizing Regulation A+: confidential submission to the SEC of your initial planned registration or offering statement. Unfortunately, companies not considered EGCs or eligible for Reg A+ do not have the benefit of confidential filing. EGCs generally have revenues of less than $1.07 billion and did not go public before the JOBS Act. Confidential submission allows a company to go through SEC review before deciding whether to move forward with an offering or filing, and if withdrawn the information does not become public.
Twitter (TWTR), with revenues just under a billion at the time, submitted its IPO confidentially at first, though announcing ironically (in a tweet of course) that they had submitted their confidential filing. Snap Inc. (SNAP) and Shake Shack (SHAK) also went confidential initially. Many believe the opportunity to see what comments the SEC will have has encouraged more than a few companies to file and plan an IPO that might not have done so.
Last week the SEC, under new Chairman Jay Clayton, announced an expansion of the availability of confidential submission to non-EGCs, but with a few more restrictions than for EGCs. It is only good for one submission. The filing after that has to be public after one round of comments. EGCs can go as many rounds as they wish before coming out of “stealth” mode as we call it. The new guidance also limits non-EGCs to benefit from confidential submission only until one year from going public. After that confidential filing is not available.