It appears the initial public offering market is indeed waking up. Last Thursday, Snap Inc. raised $3.4 billion in its IPO onto the New York Stock Exchange. OK not the biggest ever, since Alibaba raised almost $22 billion in 2014. But it’s the biggest tech IPO since the Amazon of China smashed the records. Snap, which of course owns the wildly popular app Snapchat, sold IPO shares at $17 and closed up over 40% on the first day. It rode up a little the next few days and is now back to where it closed on Thursday. Still pretty good. The company is valued now at roughly $24 billion. Three years ago Facebook offered to buy the company for $3 billion.
In a funny side story, several other companies with “Snap” in their name also shot up on Thursday in apparent investor confusion. That includes Snap Interactive, another app company, and Snap-On, the well-known tool company. Will we see trademark infringement cases? Not likely.
Another interesting sidenote was the detailed disclosure in the Snap IPO filing about cybersecurity. They admitted that the supposedly “disappearing” posts on Snapchat remain on their servers, and they admitted they have been hacked in the past. They further acknowledged that they collect a bunch of data on how people use the site, who they communicate with and the like. They have also been required by regulators to work harder to ensure that children under 13 don’t have Snapchat accounts.
So let’s give an attaboy to the Snap folks, their underwriters and the market as this huge offering hopefully will further strengthen the rebounding IPO market.
They got tucked into a transportation bill (Fixing America’s Surface Transportation Act or the FAST Act), but with a deft set of amendments the Reforming Access for Investments in Startup Enterprises Act of 2015 (or the RAISE Act) and other small business initiatives were signed by the President on December 4, 2015 and are now law. The new law also includes a direction to the SEC to change Form S-1 to allow forward incorporation by reference in filings by smaller reporting companies. This is a big and positive change for companies not eligible to use short form registration on Form S-3.
The RAISE Act assures an exemption from SEC registration for a resale of a security to an accredited investor who has access to certain information from the company, no bad actors or shells allowed, no general solicitation or advertising, no start-up companies and the class of stock being sold has to have existed for at least 90 days. This eliminates the old awkward invented Securities Act Section 4(1-1/2) exemption which was used in practice and accepted by the SEC but actually nowhere in the statute. This could help add comfort to secondary market folks who help people buy pre-IPO stocks like Facebook and Twitter before they go public. It could also help PIPE (private investment in public equity) investors who wish to transfer their shares more confidently in a private transaction before they would otherwise be eligible to sell the shares publicly.
Other very exciting changes in the law:
- mandating the SEC look to ease disclosure burdens on smaller companies, to study ways to improve and simplify disclosure rules, and reduced disclosure for emerging growth companies.
- lengthening the time you can keep your IPO filing confidential under the JOBS Act to 15 days before the first road show (from 21 days)
- permitting a JOBS Act IPO filing to exclude financials that are likely to go stale by the time of the actual offering.
- allowing an emerging growth company to still be treated like one through its JOBS Act IPO even if it stops being an EGC during the process.
Thanks House Financial Services Committee for pushing these through the “I’m Just a Bill” process!
On July 20, 2012, as required by Section 106 of the JOBS Act, the SEC released its study on the effects of decimalization (i.e., the trading and quoting of securities in increments of $.01) on initial public offerings and the liquidity of small-cap and middle-cap company securities.
In conducting its study, the SEC took a three-pronged approach consisting of (a) a review of empirical studies regarding tick size and decimalization, (b) participation in discussions held as part of a meeting of the SEC Advisory Committee on Small and Emerging Companies concerning the impact of market structure on small- and mid-cap companies and on IPOs, and (c) a survey of tick-size conventions in non-US markets.
Continue reading SEC Report to Congress On Decimalization: Prelude or Punt?