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IPO: What you Can and Can't Say




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This article is from the Investing Articles: Public Offerings: IPO and DPO series.

IPO: What you Can and Can't Say

During the "Quiet Period" there are certain things company management can and cannot say or release to the public. During this period, management is strictly bound by the information contained in the prospectus. Anything including speeches, press releases, brochures, advertising, talking to your neighbor about the offering, talking to your wife or husband about the offering, just about anything could be construed as releasing inappropriate information.

Most written communications regarding the offering are going to be kept very simple. They will merely contain the name of the issuer, the title of the security and the amount of the offering, and a brief description of the offering. I've detailed other information which can be released below. However, the best rule of thumb is to keep your mouth shut and not to say or communicate anything regarding the offering to anyone except the underwriters or in the underwriters presence. And make sure you're lawyers are present. Any misstep could set the offering back and could subject the individual or the company to sanctions.

Rule 134 of the 1933 Act sets forth the specific information which can be released to the public during the Quiet Period. This includes the name of the issuer, the title of the securities and the amount of the offering, and a brief description of the business. The 1933 Act is also very specific with regard to the description of the business. In the case of a manufacturing company, the general type of manufacturing and the principal products or classes of products manufactured. And in the case of a public utility company, the general type of services rendered and a brief indication of the area served.

In the case of an investment company registered under the Investment Company Act of 1940, the company's classification and subclassification under the Act, whether it is a balanced, specialized, bond, preferred stock or common stock fund and whether in the selection of investments emphasis is placed upon income or growth characteristics, and a general description of an investment company including its general attributes, methods of operation and services offered provided that such description is not inconsistent with the operation of the particular investment company for which more specific information is being given, identification of the company's investment adviser, any logo, corporate symbol or trademark of the company or its investment adviser and any graphic design or device or an attention-getting headline, not involving performance figures, designed to direct the reader's attention to textual material included in the communication pursuant to other provisions of this rule; and, with respect to an investment company issuing redeemable securities, and a description of such company's investment objectives and policies, services, and method of operation. The following may also be included with information regarding an investment company.

Identification of the company's principal officers. The year of incorporation or organization or period of existence of the company, its investment adviser, or both. The company's aggregate net asset value as of the most recent practicable date. The aggregate net asset value as of the most recent practicable date of all registered investment companies under the management of the company's investment adviser. Any pictorial illustration which is appropriate for inclusion in the company's prospectus and not involving performance figures. Descriptive material relating to economic conditions, or to retirement plans or other goals to which an investment in the company could be directed, but not directly or indirectly relating to past performance or implying achievement of investment objectives. And written notice of the terms of an offer made, solely to all registered holders of the securities, or of a particular class of series of securities, issued by the company proportionate to reflecting a reduction in, or elimination of, the regular sales load charged:

If any printed material permitted by the 1933 Act is included, such communication shall also contain the following legend set in a size type at least as large as and of a style different from, but at least as prominent as, that used in the major portion of the advertisements:

For more complete information about [Name of Company] including charges and expenses [get] [obtain] [send for] a prospectus [from (Name and Address)] [by sending this coupon]. Read it carefully before you invest or [pay] [forward funds] [send money]

If any material permitted by the 1933 Act is used in a radio or television advertisement, such communication shall also contain the following legend given emphasis equal to that used in the major portion of the advertisement:

For more complete information about [Name of Company] including charges and expenses [get] [obtain] [send for] a prospectus [from (Name and Address)] [by sending this coupon]. Read it carefully before you invest or [pay] [forward funds] [send money].

The 1933 Act is also very specific as to who constitutes a principal officer. The 1933 Act defines a principal officer as the president, secretary, treasurer, any vice-president in charge of a principal business function and any other person who performs similar policy making functions for the company on a regular basis.

 

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