SEC expands confidential review of registration statements

All companies are now eligible for confidential review

The SEC’s confidential review process for registration statements is no longer limited only to companies that are going public or went public within the past 12 months, allowing more companies to keep their capital-raising plans confidential for longer. Most importantly, this means:

• Companies that have been public for more than 12 months but are not S-3 eligible can now submit S-1 registration statements confidentially, just as they would during the first year of being public.
• Companies that are S-3 eligible, but not a WKSI (and therefore require the SEC to declare the S-3 effective before it can be used) can now submit an S-3 confidentially and wait for the SEC to confirm that it will not review the document before filing it publicly.

Confidential review process for follow-on offerings is substantially unchanged, though the Staff signaled potential incremental flexibility

The following key features of the confidential review process remain substantially unchanged:

Confidential review in follow-ons is limited to the initial submission of the registration statement

If the SEC Staff decides to review the registration statement, any comments must be addressed in a publicly filed registration statement. There is no limit, however, to the number of registration statements for which the process can be used.

The registration statement and the initial confidential submission must be publicly filed no later than two business days prior to the desired effectiveness time

The requirement is consistent with the minimum notice period to the SEC for acceleration requests. This is a slight departure from the prior formulation of the requirement, which required public filing no later than 48 hours prior to effectiveness. This is unlikely to have an impact in most contexts. The SEC Staff did indicate willingness to consider reasonable requests to expedite this two business-day period and encouraged companies to review their transaction timing with the Staff assigned to the filing review.

Names of underwriters can be omitted from the initial confidential submission

In a change from current SEC Staff practice, the names of underwriters can be omitted from the initial confidential submission, including in an IPO. Underwriter names will, however, need to be included in subsequent confidential submissions and publicly filed registration statements. The change allows companies to begin the confidential review process earlier, before underwriters are appointed.

In a de-SPAC transaction, confidential review process is permitted even where the SPAC survives the business combination

For de-SPAC transactions, the SEC Staff will now permit use of the confidential registration statement review process whenever the target on its own would have qualified for it. Prior to this change, the confidential review process was not available in transaction structures where the SPAC survived the transaction as the continuing public company.

Content requirements for draft registration statements remains substantially unchanged

As in the past, the draft registration statement must be substantially complete when submitted, subject to the ability to omit, consistent with existing practice, financial information that the company reasonably believes will not be required at the time the registration statement is publicly filed. The Staff expressly repeated earlier guidance that they will consider a company’s specific facts and circumstances in connection with any request for waiving compliance with certain financial statement requirements, potentially signaling greater willingness to entertain such requests, referred to as Regulation S-X Rule 3-13 waivers, than in the past.

Confidential review process remains unchanged for IPOs

The confidential review process for companies that are registering securities with the SEC for the first time remains substantially unchanged. Companies can go through multiple rounds of registration statement submissions, and continue to be required to publicly file the registration statement and any prior confidential submissions at least 15 days prior to any road show or, in the absence of a road show, at least 15 days prior to the requested effective date of the registration statement.

Confidential review is available for initial registrations under the Exchange Act in the absence of a U.S. stock exchange listing

The SEC expanded availability of the confidential review process for companies initially registering a class of securities on Forms 10, 20-F or 40-F because they exceed certain asset and shareholder number thresholds, rather than because they are listing securities on a U.S. stock exchange.