The Jumpstart Our Business Startups Act (“JOBS Act”) has created what is known as the Confidential Initial Public Offering (“IPO”), also referred to as the “quiet” or “silent” IPO.
As part of the JOBS Act, this option is available only to smaller companies called Emerging Growth Companies (“EGCs”). EGCs are companies that have annual revenues of $1 billion or less.
EGCs that qualify and choose to go public by means of a Confidential IPO can work with the SEC without being exposed to public scrutiny for a certain time period.
A company doing typical IPO has to file with the SEC several months before it conducts its roadshow and markets its shares, but an EGC pursuing a Confidential IPO only has to file three weeks before it conducts its roadshows.
When EGCs do file with the SEC, the registration drafts and correspondence can be kept private. Once public registration statements are filed, which are done with either type of IPO, the previously private documents are then attached as exhibits and can be viewed by the public.
The JOBS Act also allows more relaxed financial reporting for ECGs such as no requirement for reporting executive compensation and a 5-year “free pass” on the onerous Sarbanes-Oxley requirements. These exemptions are tied to the company’s status as an ECG, however, and not necessarily tied to the Confidential IPO process.
Is a Confidential IPO beneficial? It is still unclear. We do know that it is popular. A study that surveyed IPOs during the first year after the JOBS Act found that 75% of companies that conducted an IPO chose the Confidential IPO option