SEC clears the way for stealth IPOs for all companies

By Dave Michaels, Wall Street Journal

WASHINGTON — Wall Street’s top regulator is moving to grease the way for more initial public offerings by expanding a tool that has allowed many startups to more stealthily plan their stock sales.

The Securities and Exchange Commission, whose new chairman, Jay Clayton, has said he wants to boost the number of IPOs, announced late Thursday that it would allow all companies to file paperwork confidentially as a first step toward going public. Until now, that privilege has only been available to firms with less than $1 billion in annual revenue.

Under the new policy, effective July 10, companies will be able to file information about their finances and business trends with the SEC, but the document could be withheld from investors until 15 days before the so-called roadshow where firms meet with prospective investors. The move will allow a firm and its founders to keep the information under wraps until they have resolved to sell shares publicly.

The SEC said in a press release that, because the deal prospectus will be secret, firms will have more flexibility to time their offering. They could, for instance, delay the deal if markets are volatile or a shock has spooked potential investors. The 2012 Jumpstart Our Business Startups Act, or JOBS Act, allowed startups and smaller businesses to withhold their registration statements from the public until just before shares would be sold.

An expanded version of this report appears on WSJ.com.