May 18, 2022

JOBS Act at 10: Registered Offering Legacy

One of the more jarring aspects of the JOBS Act for me was the “IPO On-ramp” portion of the legislation, which established a new class of registrant – the “emerging growth company.” Emerging growth companies are afforded an easier path to going public, with a reduced disclosure burden and the benefit of some significant accommodations in the offering process. As you may recall, the IPO On-ramp provisions of the legislation were immediately effective, so we in the private bar and the SEC Staff had to really scramble to figure out how it would all work.

I recall the thing that upset me the most as a securities lawyer was the enactment of Section 5(d) of the Securities Act, which gives emerging growth companies the ability to “test the waters” for a proposed registered securities offering. Prior to the JOBS Act, pre-filing testing-the-waters was only permitted in Regulation A offerings, which were rarely conducted. Having spent the first fifteen years of my career worrying about “gun jumping” in the registered offering context, the notion of testing-the-waters before an IPO seemed like heresy! But, as with so many things, it has become accepted practice, so much so that the SEC decided to expand the accommodation to all issuers, not just emerging growth companies. For an in-depth discussion of the development of testing-the-waters, take a look at the September-October 2021 issue of The Corporate Counsel.

Another big accommodation that the JOBS Act provided to emerging growth companies was the option for confidential submission of the registration statement to the SEC. This accommodation has had a significant impact on the way that offerings are done today, and as with testing-the-waters, the SEC decided to extend the confidential submission accommodation to other issuers beyond emerging growth companies. From today’s perspective it makes perfect sense to permit confidential submission, but a decade ago it definitely seemed like a radical notion for IPOs to be reviewed confidentially.

The interesting legacy of the registered offering portions of the JOBS Act is that the emerging growth company “experiment” was a success, and it helped get the SEC and the market very comfortable with extending the emerging growth company accommodations to a much broader range of issuers. I don’t know that we would have seen that sort of innovation in the regulation of the registered offering process had it not been for the JOBS Act.

– Dave Lynn