If you’ve started transitioning your company and/or directors to EDGAR Next, how’s it going? Please participate in this anonymous poll to share your experience:

– Liz Dunshee

Check out John’s latest “Timely Takes” podcast – featuring Cleary’s J.T. Ho and his monthly update on securities & governance developments. In this 22-minute installment, J.T. reviews:

1. Rule 10b5-1 CDIs

2. Clawback “checkbox” CDIs

3. Tariff disclosure implications

4. Mid-season proxy trends

5. DOJ enforcement priorities

6. Latest SEC happenings

As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email John and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.

– Liz Dunshee

Here’s some encouraging news:

In Q1 2025, the US IPO market saw a 55% uptick in the number of deals and a modest increase in total proceeds. The health care and technology sectors led the activity, while significant deals across various industries pointed to broader market interest.

That’s from an EY recap of Q1 IPO stats. However, momentum is choppy at best, and as this WSJ article points out, few venture-backed tech companies are rushing to market:

Just nine venture-backed companies went public in the US this year, including several biotechs and a couple of Chinese financial and consumer companies, according to Renaissance. That is fewer than the 11 that began trading in the same period last year.

No American tech company with a large ownership by venture investors has gone public this year yet.

One reason for pause is that new IPOs are likely to be a down-round for VCs who invested at sky-high valuations. A recent article from The Information says that’s been the case for every venture-backed IPO for the past 12 months! Even so, some of those investors may be willing to patiently recover their capital in the public markets. The WSJ notes:

“For many VC-backed names, it’s not a matter of avoiding a down round entirely,” Kennedy said, “as much as mitigating it.”

Companies go public to raise capital and provide liquidity to their investors. And a down-round IPO isn’t destiny—shares can rebound and soar over the longer term. Venture-backed ServiceTitan, for example, went public in December at $71 a share, well below the $118.96 paid by investors for its Series G stock in 2021. At $126.71 at Tuesday’s close, the company’s share price is up almost 80% since the IPO.

So, take heart, set expectations, and be ready to gear up if the IPO window really does open!

– Liz Dunshee

If you’re looking for a treasure trove of IPO data, check out these stats from Professor Jay Ritter at the University of Florida. Maybe some of you are already familiar with his work – as his data informs a lot of financial reporting – but I had not done a deep dive.

This particular set looks at info from initial public offerings from 1980 to 2024 – 44 years! – including the type of backing the companies had at the time they went public, age and profitability, and first-day and three-year returns by lead underwriter. We all hear the common refrains that the volume of IPOs has been lower lately and that companies have been waiting longer to go public – but seeing the data puts things in perspective:

1. The median number of IPOs from 1980-2019 was 158 – well above the 72 IPOs last year, 54 in 2023, and 38 in 2022.

2. The average age of companies going public was 9.5 years from 1980-2019, but it’s been ticking up the past several years – from 8 in 2022, to 10 in 2023, to 14 years in 2024.

3. For tech IPOs, valuations at IPO are higher – and IPO profitability is lower. For example, in 2024, the median price-to-sales ratio was about $9-$11, compared to about $3-$4 in 1980. But that’s nothing compared to the dot-com bubble, which reached a height of $49.5!

If you’re interested in these trends, make sure to check out Jay’s page, where you’ll find info on direct listings, SPACs, industry trends, and more.

– Liz Dunshee

The Center for Audit Quality (CAQ) SEC Regulations Committee recently published notes from the Committee’s March 5th meeting with the SEC Staff from Corp Fin and the Office of the Chief Accountant. John shared an update from this meeting a couple weeks ago – that segment disclosures (and AI disclosures) rank high on the Staff’s agenda.

Additionally, the meeting involved a discussion about how to apply the “investment test” under Reg S-X Rule 1-02(w)(1)(i)(A)(1) – for purposes of determining the significance of business acquisitions pursuant to Regulation S-X Rule 3-05 – when consideration includes repurchase of the acquiror’s own shares. Here’s an excerpt:

The staff did not analogize to Financial Reporting Manual section 2015.11 in responding as they noted that current Rule 1-02(w) requires adjustments for intercompany eliminations for both the asset and income tests but does not include adjustments for intercompany eliminations for the investment test, including in circumstances when total assets should be used instead of aggregate worldwide market value (i.e., when a company does not have AWMV).

With respect to the use of AWMV in the denominator of the investment test, the staff indicated that because Rule 1-02(w) does not include any adjustments in the investment test for intercompany transactions as the other tests do, there does not appear to be a basis to exclude the repurchase of a registrant’s own shares.

Further, S-X 1-02(w) uses the term “consideration transferred” to determine the numerator of the investment test. The staff notes that “consideration transferred” is a concept in US GAAP (ASC 805) and IFRS. Therefore, if the company includes the value of the shares repurchased in determining the “consideration transferred” under US GAAP or IFRS, the staff believes the full amount of the “consideration transferred” should be reflected in the numerator and there does not appear to be a basis to exclude a portion of the consideration related to the repurchase of shares for the purposes of the investment test.

The usual caveats apply to these notes – they are a summary of discussions, not authoritative, and not an official statement of the Staff. That said, they shed some light on how the Staff views various accounting-related topics. The next Joint Meeting of the Committee and the Staff is set for June 26, 2025.

– Liz Dunshee

As I noted around this time last year, the Committee of Sponsoring Organizations of the Treadway Commission (COSO), in collaboration with the National Association of Corporate Directors (NACD), had selected PwC US to assist with developing a Corporate Governance Framework. The work has now been completed, and the result is a public exposure draft that has been published for public comment. The announcement of the Corporate Governance Framework notes:

The Corporate Governance Framework is designed to complement and align with COSO’s Internal Control (IC) and Enterprise Risk Management (ERM) frameworks. It incorporates global leading practices to help organizations enhance governance effectiveness, manage risks proactively, and create long-term value.

The 72-page public exposure draft contemplates a framework that is comprised of six components: (i) oversight; (ii) strategy; (iii) culture; (iv) people; (v) communication; and (vi) resilience. The conclusion states:

Corporate governance is not a static structure but a dynamic, evolving integrated system. When executed effectively, it enables strategy, fosters trust, supports resilience, and creates long-term value for shareholders and stakeholders alike. The integrated application of the six Components— Oversight, Strategy, Culture, People, Communication, and Resilience—provides a foundation for entities to strengthen corporate governance in both principle and practice. By aligning corporate governance with the realities of today’s complex business environment, entities can lead with purpose, respond with agility, and position themselves for success in achieving long-term value.

COSO has also posted some FAQs about the framework and the process. Comments are requested to be submitted or before 11:59 p.m. (ET) on July 11, 2025.

– Dave Lynn

Yesterday, Corp Fin issued yet another statement related to crypto activities. The statement notes:

As part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets, the Division of Corporation Finance is providing its views on certain activities known as “staking” on networks that use proof-of-stake (“PoS”) as a consensus mechanism (“PoS Networks”). Specifically, this statement addresses the staking of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network, and are used to participate in and/or earned for participating in such network’s consensus mechanism or otherwise used to maintain and/or earned for maintaining the technological operation and security of such network. We refer in this statement to these crypto assets as “Covered Crypto Assets” and their staking on PoS Networks as “Protocol Staking.”

The statement goes on to indicate:

It is the Division’s view that “Protocol Staking Activities” (as defined below) in connection with Protocol Staking do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 (the “Securities Act”) or Section 3(a)(10) of the Securities Exchange Act of 1934 (the “Exchange Act”).[10] Accordingly, it is the Division’s view that participants in Protocol Staking Activities do not need to register with the Commission transactions under the Securities Act, or fall within one of the Securities Act’s exemptions from registration in connection with these Protocol Staking Activities.

This Staff statement prompted dueling statements with catchy titles from Commissioner Peirce and Commissioner Crenshaw. In her statement, Commissioner Peirce states:

Today’s statement provides welcome clarity for stakers and “staking-as-a-service” providers in the United States. The Division’s statement is applicable to persons who self-stake certain covered crypto assets on a proof-of-stake or delegated proof-of-stake network. It also applies to non-custodial and custodial staking-as-a-service providers that facilitate this type of staking on behalf of others. Additionally, the statement explains that the pairing of certain ancillary services together with non-custodial or custodial staking services, in staff’s view, does not make providing staking services a securities offering. These ancillary services include the provision of slashing coverage, allowing crypto assets to be returned to a staker prior to the end of the protocol’s “unbonding” period, delivering earned rewards based on an alternative rewards payment schedule and in alternative amounts, and aggregating stakers’ crypto assets together for purposes of satisfying a network’s minimum staking requirements.

While Commissioner Crenshaw’s statement notes:

Channeling the old adage of “fake it ‘till you make it,” today’s statement from the Division of Corporation Finance declares that “protocol staking” – locking up crypto tokens in a blockchain protocol to earn rewards – does not involve an investment contract. Therefore, staff concludes, protocol staking activities, whether performed by an individual or a third-party service on behalf of customers, are not securities subject to SEC jurisdiction.

While acknowledging that its statement “does not alter or amend applicable law,” staff ignores how its conclusions conflict with that applicable law. The applicable law to determine whether something is an investment contract is the Howey test. In multiple enforcement actions, the Commission alleged that staking-as-a-service programs were investment contracts under Howey. Two separate courts upheld the legal basis of these allegations. The Commission recently dismissed one of these actions and today, paving the way for this statement on staking, it dismissed the other. But abandonment of these enforcement actions does not erase the underlying court decisions.

It is pretty wild to see this flurry of Staff statements come out in such rapid succession – and to see Commissioners’ statements published about the Staff statements! Somebody grab me the popcorn, this is getting good.

– Dave Lynn

LinkedIn just reminded me that I joined TheCorporateCounsel.net and its constellation of websites and publications 18 years ago this week. This is particularly notable, because 18 years is the longest I have ever stayed in one job by a pretty wide margin. Looking back over those 18 years, it has been quite a ride!

For a variety of reasons that I would be happy to share with you over a beer someday, 18 years ago I was pretty unhappy with my dream job of serving as Chief Counsel of the Division of Corporation Finance. I had a great deal of familiarity with all of the resources provided by Executive Press (now CCRcorp) as a frequent user of those resources, but it never occurred to me that one day I would be a producing those resources. Along came Broc Romanek, who offered me the opportunity to work from home, write blogs, co-author a treatise and contribute to our various print publications. It seemed like an opportunity that I could not pass up, although I think many others believed that I was crazy for not going after the traditional post-SEC law firm job.

The law firm job inevitably came along, and, at that time, I was ready to get back to practicing law, but I have never given up my chance to be a part of this community, and for that I am very grateful. I am glad that I have the opportunity to share information with you through all of our websites and publications. It is always so gratifying to hear how useful these resources are to your practice. And it is very hard to believe that 18 years can pass by so quickly!

– Dave Lynn

Last week, a group of financial services industry trade associations submitted a joint petition for rulemaking to the SEC requesting that the agency amend the Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure rule that was adopted in 2023. The petition focuses on the requirement to file current reports under Item 1.05 of Form 8-K to disclose material cybersecurity incidents.

The petition was submitted by the American Bankers Association, Bank Policy Institute, Securities Industry and Financial Markets Association, Independent Community Bankers of America, and Institute of International Bankers. The groups note that “[w]hile we continue to have significant concerns regarding the rule as a whole— including the requirements of Regulation S-K Item 106 relating to cybersecurity risk management, strategy, and governance disclosures—we believe the most urgent and problematic aspects are the cybersecurity incident disclosure mandates under Form 8-K Item 1.05 for domestic issuers and under Form 6-K for foreign private issuers, both of which require rapid—often premature— disclosure of material cybersecurity incidents.”
In support of the request to revisit the Item 1.05 disclosure requirement, the petition notes a number of key concerns:

We respectfully request that the SEC rescind Item 1.05 because: (1) publicly disclosing cybersecurity incidents directly conflicts with confidential reporting requirements intended to protect critical infrastructure and warn potential victims, thereby compromising coordinated regulatory efforts to enhance national cybersecurity; (2) the complex and narrow disclosure delay mechanism interferes with incident response and law enforcement investigations; (3) it has created market confusion and uncertainty as companies struggle to distinguish between mandatory and voluntary disclosures; (4) the incident disclosure requirement has been weaponized as an extortion method by ransomware criminals to further malicious objectives, and may subject disclosing companies to additional cybersecurity threats; (5) insurance and liability implications of premature disclosures can exacerbate financial and operational harm to registrants; and (6) the public disclosure requirement risks chilling candid internal communications and routine information sharing.

Critically, without Item 1.05, investor interests will still be protected, and we believe they would be better served, through the pre-existing disclosure framework for reporting material information— which may include material cybersecurity incidents—while better mitigating the concerns raised above.

As noted in this blog, Debevoise’s Data Strategy and Security group assisted the five trade associations in preparing the joint petition for rulemaking.

It remains to be seen to what extent the SEC will undertake any changes to the cybersecurity disclosure rules in response to this petition for rulemaking or otherwise. It does appear that the SEC is very much in “listening mode” on the topic of regulatory reform, so it is possible that this is an area the SEC will choose to focus on as it seeks to revisit some of the rulemaking that was completed by the agency over the past four years.

– Dave Lynn

Earlier this month, I reported on a data dump from the SEC’s Division of Economic and Risk Analysis (DERA) providing new data and analysis on the key market areas of public issuers, exempt offerings, commercial mortgage-backed securities, asset-backed securities, money market funds, and security-based swap dealers. Yesterday, the SEC announced that DERA has published three new reports that provide information on utilization of Regulation A and Regulation Crowdfunding and beneficial ownership of qualifying private funds. The SEC announcement notes that following about the Regulation A and Regulation Crowdfunding papers:

– Analysis of the Regulation A Market: A Decade of Regulation A provides statistics on the state of the Regulation A offering exemption over the past decade. It documents the level of offering activity and reported proceeds as well as the characteristics of issuers and offerings relying on this exemption. There were more than 1,400 offerings during this period seeking an aggregate of more than $28 billion in capital. Approximately $9.4 billion in proceeds was reported by more than 800 issuers. A typical Regulation A issuer was relatively small and young, and most issuers had not yet established a record of profitability.

– Analysis of Crowdfunding Under the JOBS Act provides an analysis of offering activity in the Title III securities-based crowdfunding market between May 16, 2016, (effective date of Regulation Crowdfunding) and December 31, 2024. During this period, there were more than 8,400 offerings initiated by more than 7,100 issuers, excluding withdrawn offerings. The offerings sought a total of approximately $560 million based on the target (minimum) amount. However, almost all offerings had a minimum-maximum format and accepted oversubscriptions up to a higher maximum. In the aggregate, the maximum amount sought in these offerings was approximately $8.4 billion. Based on the analysis of Electronic Data Gathering, Analysis, and Retrieval (EDGAR) filings during this period, there were more than 3,800 offerings where issuers reported proceeds; in total, they reported approximately $1.3 billion in proceeds. The crowdfunding exemption has continued to gain momentum over time and serves small and early-stage companies seeking access to capital, often for the first time. The median issuer had approximately $80,000 in total assets, including $13,000 in cash, $60,000 in debt, and $10,000 in revenue, and three employees.

DERA’s papers on Regulation A and Regulation Crowdfunding are timely as the SEC considers ways to promote capital formation, particularly for smaller companies.

– Dave Lynn