IPO Timelines Are Cut by 80% After SEC’s Private Filing Decision
Blink and you’ll miss it. Initial public offerings that once took seven months to go from announcement to trading are now taking less than 50 days.
The streamlining is the result of the U.S. Securities and Exchange Commission’s decision to allow all companies to confidentially file early documents for IPOs. The process, originally meant to aid small businesses as part of the Obama administration’s Jumpstart Our Business Startups Act of 2012, was extended to all companies effective July 10. It’s part of regulatory attempts to make public markets more attractive and IPOs more efficient.
The result has been a nearly 80 percent reduction, since the start of 2015, in the number of days from announcement of the IPO until the first day of trading, according to data compiled by Bloomberg.
Time from announcement to pricing is down 80 percent since the first quarter of 2015
Note: Statistics through Dec. 15. Excludes funds, real estate investment trusts and special-purpose acquisition vehicles.
Companies, particularly those in the technology industry, have shied away from public offerings in recent years in favor of private funding.
Filing confidentially allows a business to take an iterative approach to their pitch process. Companies can adjust the presentation based on feedback they receive without having to reveal sensitive information to competitors.
“Letting the world see all of your financials and all of your strategies and all of your risks long before you go public causes some companies to pull back from that,” SEC Chairman Jay Clayton said during a September testimony before the Senate Banking Committee. “It’s a very smart move that in no way lessens investor protection and actually increases the number of opportunities investors have.”