Last week, Twitter’s Form S-1 was made public, as noted in this DealBook piece. As noted in this article, perhaps too much information was revealed because a lock-up expiration date was included – although predicting a date that an IPO will go to market off this information is plain silly. That is dependent on market conditions, etc. – not driven by a date in a pre-effective registration statement that can be easily changed.
As you can imagine, I received a lot of feedback on my recent blog about Twitter’s IPO. First, here’s the poll results in response to the question of “whether you think that a response of dot-dot-dot is the equivalent of no comment:”:
– No comment – 53%
– Yes, we are doing an IPO – 25%
– Get out of my way – 11%
– Did you just slip me a mickey? – 12%
More on “Can Companies Announce Confidential S-1 Submissions By Tweet?”
The other issue that I blogged about was the ability of companies to rely on Rule 135 to announce a confidential Form S-1 submission by a tweet. I argued that a tweet could comply with Rule 135. But I will now make the interesting observation that a Rule 134 notice (the applicable safe harbor after filing) probably couldn’t be relied upon for a tweet due to the more lengthy disclaimers in that rule – juxtaposed by the fact that a tweet is limited to 140 characters – unless there was clearer guidance from the SEC that the disclaimers could simply be linked to in the tweet.
As for whether a confidential submission in considered to be a “filing” – thus rendering Rule 135 inapplicable – the Corp Fin Staff issued this FAQ:
Question: Does the confidential submission of the draft registration statement constitute a filing for purposes of the prohibition in Section 5(c) against making offers of a security in advance of filing a registration statement?
Answer: No, since the confidential submission is not the filing of a registration statement, it would not count as the filing of a registration statement for purposes of Section 5(c).
As I originally blogged, I think it would be hard to argue that a tweet does not fit within the plain meaning of Rule 135 since the rules lays out what is permitted, not what is required (beyond a simple legend).
Should Companies Use Their Ability to Make Confidential S-1 Submissions?
Many in the mass media became fixated with the ability of qualified companies – as now permitted per the JOBS Act – to file their initial registration statements with the SEC confidentially. Here are articles in favor (or neutral):
– The New Yorkers’ “The Virtues of Twitter’s Confidential I.P.O. Filing”
– Fortune’s “Twitter’s IPO will not be done in secret”
– Gunster’s “Twitter announces its IPO in a tweet”
Here are articles that are against the practice:
– Politico’s “Twitter’s IPO: Five questions for Washington”
– The Guardian’s “Twitter’s secret IPO undermines its mission of transparency”
– New York Magazine’s “Twitter Files for Supersecret IPO”
– DealBook’s “An Initial Filing, in Fewer Than 140 Characters”
Also see DealBook’s “In Twitter’s IPO Filing, Signs of a Start-Up That Has Matured.” It notes: “The Twitter IPO filing released last week had 86 percent of the initial one’s content.” Also see Marty Rosenbaum’s blog about Twitter’s simple governance structure.
Twitter: 55 Risk Factors! Does Size Matter?
It’s funny to see the mass media wrestle with the risk factors in Twitter’s IPO (and this blog notes 5 favorites). I count 55 risk factors in Twitter’s Form S-1. As I wrote in my “Risk Factors Handbook,” companies typically have between 20-30 risk factors in their disclosure – with IPOs having even more. Facebook had about 50. Do you think the number of risk factors corresponds to the overall risk of investing in a particular IPO?
Poll: How Many Weeks Do Investors Need to Digest the Form S-1 Before an IPO?
In the media articles against the confidential process above, the most cited criticism is that the period of time before a Form S-1 is publicly available before the IPO commences might be as short as 21 days under the JOBS Act. As noted in this New Yorker piece, this is not much shorter than the IPOs of Apple and Microsoft back in the day – but don’t let that sway your vote below:
– Broc Romanek