The Offering Process As described in more detail below, the IPO process is divided into three periods: ■ The pre-filing period is the time period between mandating investment banks for the IPO and the first public filing of the IPO registration statement with the SEC. During this time, the company is in the “quiet period” and subject to limits on public disclosures relating to the IPO. ■ The waiting or pre-effective period is the time period between the date of the first public filing of the IPO registration statement with SEC and the date on which the SEC declares the IPO registration statement “effective.” During this period, the company may make oral or written offers but may not enter into binding agreements to sell the offered security. ■ The post-effective period is the time period between effectiveness of the IPO registration statement and the 25th day after effectiveness. During this period, the underwriters may publicly sell the securities by delivering the prospectus contained in the IPO registration statement or a notice with respect to its availability. Diligence A company should keep in mind that underwriters have at least two conflicting responsibilities—to sell the IPO shares on behalf of the company and the selling stockholders, if any, and to recommend to potential investors that the purchase of the IPO shares is a suitable and compelling investment. In order to better understand the company—and to provide a defense in the event that the underwriters are sued in connection with the IPO—the underwriters and their counsel typically spend a substantial amount of time performing business, financial, accounting, and legal due diligence in connection with the IPO to avail themselves of an affirmative “due diligence” defense under the federal securities laws. During the pre-filing period, key management personnel generally will make a series of presentations to the underwriters covering the company’s business and industry, market opportunities, and financial performance. The underwriters typically will use these presentations as an opportunity to ask questions and establish a basis for their affirmative “due diligence” defense. In particular, underwriters will want to visit the most significant properties owned by equity REITs and analyze the mortgage loan portfolios of mortgage REITs. Furthermore, it is important that any material items identified during the due diligence process are appropriately reflected in the IPO prospectus to ensure that there are no material misstatements or omissions in the disclosure in the IPO registration statement and the included prospectus. 11 | 2024 Guide to REIT IPOs and Listing Transactions
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