As we are all aware, the SEC has been closed since December 27th as a result of the ongoing partial shutdown of the federal government. While there are staff members available to respond to emergency situations involving market integrity and investor protection, including law enforcement, and the SEC continues to operate certain systems such as the EDGAR system, most activities are currently suspended. The SEC does not have staff in place to review registration statements and other filings, acceleration requests, Rule 3-13 waiver requests, and no-action letter requests, including with respect to shareholder proposal exclusions. As discussed in our previous post available here, the Staff has provided an FAQ page regarding operations during the shutdown. These FAQs were updated and supplemented recently. You should continue to visit the SEC’s website, including the FAQs, for any additional updates both during and shortly after the shutdown.
Significant to capital markets and M&A activity, the staff advised that new eligible registration statements may be filed without a delaying amendment in order to automatically go effective after 20 days, and previously filed registration statements may also be amended to remove delaying amendments in order to allow for automatic effectiveness. In the past three weeks, several companies have removed the delaying amendment on their registration statements, including Forms S-4 for public company mergers. In order to allow for automatic effectiveness after 20 days, such amendments must (1) remove the delaying amendment, (2) include all information required by the relevant form, including information typically excluded from preliminary filings with delaying amendments such as the price of securities to be sold, and (3) include the following language required under Rule 473(b) under the Securities Act of 1933: “This registration statement shall hereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933." We note you should also update other references to the registration statement being “declared effective," such as in the “approximate date of commencement of proposed sale of the securities to the public" field on the cover page. If you amend your filing to remove the delaying amendment and the SEC’s operating status changes prior to the effective date of your registration statement, the staff may ask you to amend your filing to include the delaying amendment so that the staff may work with you to resolve outstanding comments.
It is important to remember that Rule 430A is only available with respect to registration statements that are declared effective by the SEC. In order to take advantage of the flexibility afforded by Rule 430A with respect to the timing of pricing an IPO and upsizing and downsizing an IPO, an IPO candidate will most likely want to wait for the staff to declare the registration statement effective before launching the IPO. (If a registration statement on Form S-1 for an IPO were to remove the delaying amendment in order to go effective, such registration statement would have to accurately predict and include the price at which the securities will be sold 20 or more days later when the registration statement is effective.) As a result, an extended continuation of the shutdown will likely result in IPO candidates delaying or even temporarily shelving their IPO plans, especially when coupled with volatile market conditions. Already the shutdown has prevented numerous companies preparing high profile IPOs from receiving comments on their registration statements or having the registration statement declared effective on a typical schedule. The delay in receiving comments, responses to requests regarding financial statements, and effectiveness notices is expected to continue for some period of time following the eventual reopening of the SEC. This may have a lingering impact on US market activity in 2019, particularly if SEC reviews cannot be completed and offerings priced before the traditional quarterly blackout begins near the end of June, such that offerings risk being delayed until after Labor Day and the end of the summer slowdown.
Special appreciation to associate Michael Mencher for his assistance with this post.