In late June – as most folks were winding down for the Independence Day holiday weekend – the Securities and Exchange Commission quietly made an announcement.
It could spark a flood of new IPOs from companies including Airbnb, Spotify and Uber before the end of the year.
The S.E.C. press release was given a non-descript headline that could only be written by a government bureaucrat:
Draft Registration Statement Processing Procedures Expanded
Despite a boring headline, the release was significant. It explained that the S.E.C. will now allow ALL companies to file confidential documents for an Initial Public Offering.
That’s an expansion of current rules that are in place for “emerging growth companies.”
In 2012, President Barack Obama signed the Jumpstart Our Business Startups Act. The JOBS act allowed companies with less than $1 billion in revenue to submit registration statements for non-public review.
The new rule change allows all companies to begin the IPO process without revealing confidential information that might be beneficial for their competitors. The rule change went into effect on July 10th.
The goal of the S.E.C. is to expand the pipeline for IPOs by encouraging more companies to begin the filing process.
The announcement was a big move for S.E.C. Chairman Jay Clayton. Prior to his nomination by President Trump, Clayton was a partner at the law firm of Sullivan & Cromwell where he advised private and public companies on securities offerings and M&A activities.
Clayton explained his decision, saying “By expanding a popular JOBS Act benefit to all companies, we hope that the next American success story will look to our public markets when they need access to affordable capital.”
Total IPOs in the U.S. have been in a downtrend. Back in 1999 and 2000, more than 300 companies went public on U.S. stock exchanges every year. By last year, that number had shrunk to just 106.
This year, we have begun to see an uptick in the number of IPOs and the total transaction value. This announcement should help boost the IPO pipeline in the second half of the year.
Nasdaq (NASDAQ: NDAQ) CEO Adena Friedman commented, “We applaud the SEC for today announcing it will allow all newly public companies to file registration statements confidentially. We have long supported such an action and believe it is one step forward in making the public markets more attractive, which will foster economic growth.”
Snap (NYSE: SNAP) was one of the biggest companies to take advantage of the confidential IPO filing. The company first filed papers back in November, in advance of an IPO in March.
The IPO pipeline continues to grow. In fact, we’re hearing news that the S.E.C. is secretly reviewing Spotify’s IPO plans. And Roku may be the next private company worth more than $1 billion to begin trading.
Inside my urgent briefing, I’ll explain how to invest in these private companies before they go public.