Facebook matthew banks11/15/2022 ![]() Meredith Cross, director of the SEC’s Division of Corporate Finance, said during an April 11 legal panel - before Facebook’s debut - that the regulator will want to understand whether information shared by companies ahead of IPOs may be of interest to investors generally.Īnna Pinedo, a partner at Morrison & Foerster who attended the April 11 panel, said Cross’s comments likely mean the SEC will ask to see what information companies share with investors and analysts to make sure it is consistent with what has been publicly disclosed. The JOBS Act has not yet been fully interpreted by the Securities and Exchange Commission and other regulators, and details of the new rules could also be influenced by inquiries into the problems arising from the Facebook IPO. “To the extent that material information is conveyed in such communications, issuers and underwriters will need to make certain that the same, or equivalent, material information is made available at some point in the offering process to all investors.” “The JOBS Act permits robust communications with institutional investors prior to an offering,” he added. “If the JOBS Act lives up to its advance billing, there will be no need to whisper,” said Jim Tanenbaum, a partner at law firm Morrison & Foerster. But the vast majority of start-up company IPOs fall into the sub-$1 billion category. That means Facebook, with 2011 revenue of $3.71 billion, would not have qualified. The new law applies only to companies that have less than $1 billion of annual revenue. It also allows analysts employed by the underwriting banks to communicate more broadly with investors through written research reports before IPOs. The JOBS Act allows companies to communicate orally and in writing with investors before they file for an IPO. That interpretation of the law and its ability to change research practices remains to be seen. Rules designed to protect investors prohibit underwriters from publishing research on pre-public companies, while allowing verbal communication of such information. Lead underwriter Morgan Stanley has insisted that limited disclosure of forecasts, far from breaking any rules, was standard procedure for an IPO and in compliance with all applicable regulations. #Facebook matthew banks professional#With Facebook’s shares now trading more than 25 percent below their May 18 offering price, retail investors have complained that they did not have access to vital information that was available to big professional investors. In the case of Facebook, research analysts working for the underwriters reduced their forecasts just days before the IPO, and then shared the new estimates orally - whispered via conference calls - with some institutional investors. But the law also eases restrictions on what companies and analysts can say and do in the run-up to an initial public offering, which in turn could mean broader disclosure of some kinds of information. The Jumpstart Our Business Startups Act, which President Barack Obama signed into law in early April, has been criticized for watering down regulations governing capital raising and increasing the potential for fraudulent stock sales. The selective disclosures appeared to expose a regulatory loophole, and some bankers and securities lawyers now say relief could come from a surprising quarter. SAN FRANCISCO, June 5 (Reuters) - In the aftermath of the Facebook IPO, investor outrage - and lawsuits - have focused on “whisper” estimates of future results that underwriters shared only with some clients. * Will investment banks fully embrace Jobs Act? * Jobs Act could get rid of “whisper” estimates ![]()
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