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Preparing to Operate in “Stealth” Mode
To operate with stealth means maintaining a low profile – giving no signal as to what your company is doing. When a company is getting ready to go public, the government requires that the company limit the information it releases, and the company needs to operate in relative silence – flying below the radar but still able to function in its normal business environment. This white paper addresses what is meant by operating in this government-mandated blackout period, a timeline for each stage (the years leading up to the public offering, pre-filing, post-filing, and how early to begin). Setting objectives and meeting them without violating securities regulations is the key to maximizing initial price. Management teams preparing for a public offering often encounter a harsh reality. They are preparing for one of the most profound experiences available in the business world; going public provides a significant opportunity for companies to access capital. But, the process is extensive and demanding. Going public is not easy. The purpose of this white paper is to serve as a primer for executives, officers, and others involved in the public offering process. It is difficult to keep track of what company executives can and cannot say during the pre-IPO blackout period. Company spokesman are sometimes speechless during the initial public offering process precisely because they don’t know what to say, what they can say, or what they should say. A common misconception of executives planning an IPO is that nothing can be said during the IPO process. This quandary stems from a feeling that the rules governing an IPO’s quiet period are mysterious and often misunderstood. Your company can speak during this blackout period, but it must do so judiciously. Case in point: your company is loading up for a national road show. This typically doesn’t happen until months after a company files the initial registration filings with the SEC. In days of old, revenue streams remained largely intact within this period as operational performance continued clipping along a relatively constant pace. But overnight small cap companies operating in the New Economy can ring up successes that change the profile of the operating entity. In the new millennium, during the period between filing the registration statement and meeting with potential investors, a company’s revenue can double or even triple! Under the Securities Act of 1933, which governs this topic, issuers may release factual elements on business activities such as new contracts, product announcements, and staffing mud? Some companies like to take advantage of this communication opportunity, as it can be highly beneficial albeit risky. Companies releasing positive news toward the end of the quiet period regularly enjoy a bigger boost in stock price when the quiet period ends than those remaining silent. In the race to stay competitive for a share of the investors’ funds, management teams might be enticed to mention publicly or through the media the good fiscal news. As soon as you open your mouth, the Martha Stewart prosecution team will pounce, as doing same is a clear violation of SEC law. Why? Such updates arc not written in the filing documents. This makes it difficult to ascertain how you can operate and communicate during this pre-IPO quiet period. If you mention an uptick in revenue or anything else for that matter, which is not stated in the prospectus, the SEC could find out and shelve your filing for as long as it sees fit. This time in the penalty box opens the door to allow potential investors to take their money elsewhere. But if “mums the word”, your company may miss a platinum opportunity to shine and attract new prospective investors. [continued...] Want to know more? Download the White Paper "Preparing to Operate in “Stealth” Mode" for just $29.95. |
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