Page 87 - Initial Public Offering - An Introduction to IPO on Wall Street

The Waiting Period

The "waiting period" or "cooling-off period" starts and lasts until the effective date of
registration after the statement of registration has been submitted. There are limitations on the
tasks the organization and the underwriter may perform during this time. Underwriters can
consider "indications of interest" from prospective buyers during the waiting period, but no real
transactions can be done until after the effective date.

Responding to SEC Comment Letters and Preparing the Amended Registration
Statement

The SEC staff usually issues a comment letter after analysis of the statement of registration
pointing out concerns, potential shortcomings, and recommended amendments.

Usually, filing of a carefully crafted registration document limits employee feedback. Although
there are often differences of opinion as to the ownership of a specific statement or application,
most employee comments and feedback are positive.
Before the registration statement becoming valid, each comment in the staff letter must be
answered and settled in writing. Where revisions are required, they shall be made in a revised
statement of registration, which shall also be filed through EDGAR. The comment letters and
the organization’s replies are publicly accessible via EDGAR after successful filing.

Furthermore, major changes frequently occur during the time following the submission of the
initial statement of registration and before the final approval of the SEC, and these advances
must be documented. For instance, if development is substantially unfavorable, it will impact
the appeal of the offering.

Contrarily, a positive development may minimize ambiguity about an organization and its
prospects, such as the favorable resolution of major litigation. In other words, any provisional
changes which have a significant effect on a business and its future must be reported utilizing
revisions to the initial statement of registration.

In general, an organization should expect it to take about thirty days from the time the statement
of registration is submitted with the SEC for its staff to perform their initial analysis and issue
comments.

A business should then expect to get multiple subsequent letters of comment from SEC staff
detailing follow-up concerns about the answers to the original comments or relevant comments
on the updated or revised details contained in the registration statement. These replies typically
vary from two weeks (second submission) to a week or less (subsequent submission).

In addition to filing a statement of registration with the SEC, the organization must make filings
both with FINRA and in the states in which the business plans to sell the securities.
Organizations must submit the original confidential request and any changes publicly with the
SEC; this needs to be done at least fifteen days before the date on which the roadshow takes
place.

“Red Herring” or the Preliminary Prospects

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