In addition, the federal securities laws, particularly Sections 11 and 12 under the Securities Act and Rule 10b-5 under the Exchange Act, require that documents used to sell a security contain all of the information material to an investment decision and do not omit any information necessary to avoid misleading potential investors. Federal securities laws do not define materiality; the basic standard for determining whether information is material is whether a reasonable investor would consider the particular information important when making an investment decision. That simple statement is often difficult to apply in practice. Submitting the Form S-11 to the SEC While there is no prescribed time period, typically four to six weeks will pass between the distribution of a first draft of the registration statement to the working group (consisting of the issuer, the underwriters, their respective counsel, and the auditors) and its filing with, or confidential submission to, the SEC. To a large extent, the length of the pre-filing period will be determined by the amount of time that is necessary to prepare the required financial statements to be included in the registration statement. An issuer may confidentially submit a draft registration statement to the SEC for non-public review prior to publicly filing, but must publicly file (referred to as the “public flip” or “going live” on the filing) its registration statement at least 15 days prior to commencing the IPO road show. The confidential submission process allows an issuer to commence the SEC review process without publicly disclosing sensitive information and to work through the SEC comment process without the glare of publicity and without competitors becoming aware of the proposed IPO. Furthermore, if the issuer determines that the market will not be receptive to the IPO (through a test the-waters process or otherwise) or that other alternatives are more appealing, it can withdraw from the process without the stigma of a failed deal. To ensure that the SEC has the opportunity to fully review and comment on the company’s proposed disclosures to investors, any confidential submission or public filing should be materially complete—companies that make significant changes to the prospectus disclosure after the initial submission or filing of the registration statement run the risk of generating new, potentially significant comments from the SEC, which could result in a delay in the IPO process. With respect to financial statements in draft registration statements confidentially submitted to the SEC, issuers can omit financial information for historical periods otherwise required to be included in their draft registration statements if they reasonably believe that such financial information will not be required at the time of the contemplated offering due to the passage of time and the need to include more recent financial information before the registration statement becomes effective. However, interim financial information that will be included in a historical period that a non-EGC reasonably believes will be required to be included at the time of its first public filing may not be omitted from its filed registration statements. Responding to SEC Comments An integral part of the IPO process is the SEC’s review of the registration statement. Once the registration statement is filed or confidentially submitted, a team of SEC staff members is assigned to review the filing. The team consists of accountants and lawyers, including examiners and supervisors. The SEC’s principal focus during the review process is on disclosure. In addition to assessing compliance with applicable SEC disclosure requirements, the SEC endeavors to assess disclosures through the eyes of a reasonable investor in order to determine the type of information that would be considered material. The SEC’s review is not limited to just the registration statement. The SEC staff will closely review websites, databases, and magazine and newspaper articles, looking in particular for information that the SEC staff thinks should be in the prospectus or that contradicts information included in the prospectus. Initial comments on Form S-11 are typically provided by the SEC staff approximately 30 days after the initial filing or submission—depending on the SEC’s workload and the complexity of the filing, the receipt of first-round comments may be sooner or later. The company and its counsel will prepare a complete and thorough response to each of the SEC staff’s comments. In some instances, the company may not agree with the SEC staff’s comments and may choose to schedule calls to discuss the matter with the SEC staff. The company will publicly file, or confidentially submit, an amendment revising the registration statement in response to the SEC staff’s comments and provide the response letter along with any supplemental information requested by the SEC staff. The SEC staff generally tries to address response letters and amendments within 14 days, but timing varies considerably. 2024 Guide to REIT IPOs and Listing Transactions | 14
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