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On Monday, May 24, 2021, at 12:00 p.m. (ET) Investor Protection, Entrepreneurship, and Capital Markets Subcommittee Chairman Sherman and Ranking Member Huizenga will host a virtual hearing entitled, “Going Public: SPACs, Direct Listings, Public Offerings, and the Need for Investor Protections."
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Witnesses for this one-panel hearing will be:
• Stephen Deane, Senior Diretor of Legislative and Regulatory Outreach, CFA Institute
• Andrew Park, Senior Policy Analyst, Americans for Financial Reform
• Usha Rodrigues, Professor & M.E. Kilpatrick Chair of Corporate Finance and Securities Law, University of Georgia School of Law
• Scott Kupor, Investing Partner, Andreessen Horowitz
Overview
The phrase “going public” historically refers to the process by which a privately held company sells shares of its stock to the general public for the first time through an initial public offering (IPO). The Securities Act of 1933 (“Securities Act”) requires the disclosure of all material facts about securities that are publicly offered for sale so that investors can make fully informed investment and voting decisions. Section 5 of the Securities Act requires every offer and sale of securities to be registered with the Securities and Exchange Commission (SEC) unless there is an exemption available.3 For registered securities, issuers are required to file a registration statement with the SEC, typically using Form S-1, which includes a prospectus containing audited financial statements, as well as detailed disclosures about the issuer’s business operations, financial condition, risk factors, and its management.4The Securities Act provides several exemptions from the registration requirements5 and authorizes the SEC to exempt additional classes of securities. A security offered or sold in reliance on an exemption is known as an “exempt offering,” and the markets for these exempt offerings are known as “private markets.” Because exempt offerings are not required to be registered, investors receive significantly less information about the security than investors in registered offerings.
Initial Public Offerings
The IPO process officially begins with the filing of a registration statement, typically Form S-1, with the SEC, which includes important disclosures such as the prospectus that will be used to advertise the securities to investors, information on the financial health of the company, and details of company operations and strategy. Under Section 5(c) of the Securities Act, a company is generally prohibited from holding meetings to solicit investors regarding its IPO, also known as a “Road Show,” prior to filing a registration statement. Upon filing, the registration statement will undergo a review by SEC staff for compliance with requirements on the disclosure of information material to investors and applicable accounting standards. During the review process, SEC staff will provide comments to the company on any revisions to the registration statement that need to be made before the transaction will be allowed to go forward. Under Sections 11 and 12 of the Securities Act, issuing companies, their directors, and underwriters are legally liable for “misstatements and omissions in disclosures made in connection with a public offering.” In contrast, when issuers are found to have made inaccurate or misleading forwardlooking statements in other types of SEC filings, such as annual reports and proxy statements, they are granted a measure of protection from lawsuits by the Private Securities Litigation Reform Act (PSLRA) of 1995.
When companies go through the IPO process they generally must rely on underwriters, typically investment banks, to assists with the marketing and sale of their securities. Fees charged by underwriters are frequently cited as one of the most significant costs associated with a company completing an IPO. According to an analysis by PwC, between 2015 and 2020, underwriter fees have on average ranged from 3.5 percent of gross proceeds of the IPO for offerings over $1 billion to 7 percent of gross proceeds for offerings $25 to $99 million.14 IPOs also often involve what is known as a “lockup agreement” between the issuing company and its underwriters. Lockup agreements are generally designed to prevent company directors, employees, and early investors from selling their shares in the company too soon, usually within 180 days, after the IPO is completed.
Special Purpose Acquisition Companies
A special purpose acquisition company (SPAC) is a company which is established by a management team, also known as a “SPAC sponsor,” with...
Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407753
Дата на публикация: 25 май, 2021
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