On September 28, 2012, the Securities and Exchange Commission (SEC) issued additional frequently asked questions (FAQs) as part of its guidance on Title I of the Jumpstart Our Business Startups Act (JOBS Act) related to emerging growth companies (EGCs).
Most of the FAQs cover issues related to M&A activities of, and financial information presented by EGCs. For example, the SEC clarified that an EGC may use test-the-waters communications with qualified institutional buyers and institutional accredited investors in connection with an exchange offer or merger. An EGC may also use the confidential submission process to submit a draft registration statement for an exchange offer or merger that constitutes its initial public offering of common equity securities.
The SEC provided guidance related to instances when an EGC may or may not present only two years of financial information. For instance, if a target company that does not qualify as a smaller reporting company is to be acquired by an EGC that is not a shell company and that will present only two years of its financial statements in its registration statement for the exchange offer or merger, the EGC may present only two years of financial statements for the target company in its registration statement. However, the SEC clarified that an EGC that is not a smaller reporting company is required to present three years of financial statements in its registration statement on Form 10 or Form 20-F under the Securities Exchange Act of 1934. The JOBS Act accommodation, which permits two years of financial statements, applies only to the Securities Act registration statement for the initial public offering of common equity securities.
In addition, the FAQs specified that the SEC would not object if an issuer that lost its EGC status does not present, in subsequently filed registration statements and periodic reports, selected financial data or a ratio of earnings to fixed charges for periods prior to the earliest audited period presented in its initial registration statement.
The SEC also indicated that an issuer, which is not currently required to file Exchange Act reports but was once an Exchange Act reporting company and is now planning to conduct a public offering of its common equity securities, can take advantage of the benefits of EGC status, even though its initial public offering of common equity securities occurred on or before December 8, 2011. However, this position is not available to an issuer that has had the Exchange Act registration revoked pursuant to Section 12(j) of the Exchange Act.