July 2, 2018

IPO Trends: Bigger & Faster – But Lighter on Disclosure

Lots of interesting stuff in this Proskauer memo analyzing market practices & trends for US-listed IPOs in 2017. Here are some of the highlights:

– In 2017, the average base deal size was $285 million and the median base deal size was $141 million, compared to $214 million and $116 million in 2016, respectively.

– 70% of EGCs included two rather than three years of audited financial statements (a 32% increase since 2013) and 56% of EGCs included only two years of selected financial statements (a 21% increase since 2013). Only 4% of EGCs included five years of selected financial statements in 2017, compared to 29% in 2013.

– Outside of 2014, IPOs in 2017 had the fastest time from the first confidential submission or filing with the SEC to pricing; the average number of days to pricing was 135 and the median was 103. In 2016, the average time from first submission/filing to pricing was 220 days.

– Since 2014, there has been a 41% decrease in the average number of first-round SEC comments and 37% decrease in the median number of comments.

– Approximately 30% of issuers went public with multiple classes of common stock in 2017 as compared to 18% of issuers in 2016. Almost 68% of these issuers provided for unequal voting rights among classes.

There’s plenty more where that came from – including information on “hot button” comments and data on pre-IPO private placements.

Insider Trading:  Another Equifax “Guesser” in the Hot Seat

We previously blogged about the SEC’s filing of insider trading charges against a former Equifax executive who sold the company’s shares based on his correct guess that the company had experienced a massive data breach.

Last week, the SEC filed an insider trading complaint against another former Equifax employee, and this excerpt from the SEC’s press release indicates that the agency’s  “insider guessing” theory features prominently in this new proceeding as well:

In a complaint filed in federal court in Atlanta today, the SEC charged that Equifax software engineering manager Sudhakar Reddy Bonthu traded on confidential information he received while creating a website for consumers impacted by a data breach.

According to the complaint, Bonthu was told the work was being done for an unnamed potential client, but based on information he received, he concluded that Equifax itself was the victim of the breach. The SEC alleges that Bonthu violated company policy when he traded on the non-public information by purchasing Equifax put options. Less than a week later, after Equifax publicly announced the data breach and its stock declined nearly 14 percent, Bonthu sold the put options and netted more than $75,000, a return of more than 3,500 percent on his initial investment.

As we noted in a prior blog, the SEC lost a case in 2010 premised on an insider guessing theory, so it will be interesting to see how the theory stands up as these actions move forward.

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John Jenkins