IPO Quiet Period

The U.S. Securities and Exchange Commission (SEC) requires that most companies making an initial public offering (IPO) complete a registration statement. The SEC then imposes a "quiet period," also known as a "waiting" or "cooling-off" period, that extends from the time the company files a registration statement until the statement is approved by the SEC and becomes effective. Typically, the quiet period lasts from 40 to 90 days. The quiet period limits what a company and it's affiliates may disclose to the public regarding the future of the company and the nature of the offering.

Purpose of the Quiet Period

Companies undertaking an IPO often wish to increase the value of their stock by promoting their business through press releases and other public outlets. The quiet period gives investors adequate time to research the offering and allow market forces to establish a fair value of the stock before the stock is influenced or "hyped" by the offering company.

Quiet Period Limitations

Historically, the quiet period restricted the release of all forward-looking information about the company issuing an IPO. However, on June 29, 2005, the SEC modified and relaxed the quiet period restrictions set forth in the Securities Act of 1933. The new guidelines distinguish between three categories of issuers: well-known seasoned issuers, reporting issuers and non-reporting issuers. All issuers are permitted to use a free writing prospectus after filing the registration statement, subject to conditions enumerated by the SEC.

• Well-Known Seasoned Issuers. Well-known seasoned issuers are the most active issuers in the U.S. public capital markets. A well-known seasoned issuer is defined by the SEC as an issuer who is required to file reports under Section 13(a) or Section 15(d) of the Exchange Act. Additionally, a well-known seasoned issuer must satisfy the registration requirements of Form S-3 or Form F-3, and must either possess over $7 million in equity, or have issued over $1 billion in securities in the past three years. A well-known seasoned issuer may engage at any time in oral and written communications with the public, subject to enumerated conditions (such as, in some cases, filing a statement with the SEC). A well-known seasoned issuer may therefore release information about their company during the quiet period, so long as the communication complies with SEC requirements.
• Reporting Issuers. A reporting issuer, also known as an unseasoned issuer, is an issuer who is obligated to file reports under Section 13(a) or Section 15(d) of the Exchange Act, but who does not satisfy the requirements of Form S-3 or Form F-3. All reporting issuers are permitted to continue to publish regularly released factual business information during the quiet period, as well as any forward-looking business information.
• Non-Reporting Issuers. A non-reporting issuer is an issuer who is not required to file reports under Section 13(a) or Section 15(d) of the Exchange Act. Information issued by a non-reporting issuer is highly regulated during the quiet period. A non-reporting issuer may, at any time, continue to publish factual business information that is regularly released and is not intended for use by investors or potential investors. A non-reporting issuer may not, however, release forward-looking information about the company or any other information intended for use by investors during the quiet period.