It appears that the US Government shutdown is going to last for a bit. Market participants are accordingly asking what options are available to get pending deals across the finish line while the SEC is not able to declare registration statements effective.
Securities Act Section 8(a) provides a key tool while the SEC is in shutdown mode. Under this provision, a registration statement will automatically go effective 20 calendar days after filing unless the SEC intervenes. (Section 8(a) is not used in normal practice when the SEC is operating; instead the registration statement cover page includes magic words – known as the delaying amendment – to postpone effectiveness until the SEC has reviewed the filing and declared it effective.)
Here's what you need to know about removing the delaying amendment under Section 8(a).
1. In which types of transactions would removal be appropriate?
You can consider removing the delaying amendment if you are working on:
- IPOs on Form S-1/F-1;
- conventional shelf registration statements on Form S-3/F-3; or
- business combinations and exchange offers on Form S-4/F-4.
In each case, however, removal is only appropriate if you have already cleared all significant SEC comments. Note that removal is not relevant for automatically effective registration statements such as WKSI shelves or Form S-8 filings.
2. How do I remove the delaying amendment?
You will need to publicly file (or amend, if you have already filed) the registration statement to include the following sentence from Rule 473(b): “This registration statement shall hereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933.” Note that confidential submission will not work for these purposes.
3. What must be in my registration statement?
Your registration statement needs to be final, with all required disclosure. In the case of a shelf registration statement on Form S-3/F-3 and Form S-1/F-1, you would include all the information you normally include in a base prospectus and would subsequently file prospectus supplements once the base had gone effective. Bear in mind that Form S-3/F-3 benefits from forward incorporation by reference, while Form S-1/F-1 generally does not. So, you will need to sticker your Form S-1/F-1 shelf with updates filed as prospectus supplements under Rule 424(b).
For business combination transactions and exchange offers on Form S-4/ F-4, you would include all the information that would be required in an effective registration statement, including the meeting date or tender offer expiration date.
4. We’re working on an IPO. Must we include a pinpoint price to remove the delaying amendment – i.e., are the figures for the price to the public and underwriting discount fixed in stone for 20 days before sales can be made?
Not necessarily. The relatively few examples of removing the delaying amendment from the last significant shutdown (for 34 days from December 2018-January 2019) indeed used pinpoint prices. But in our view, an alternative is available: namely, to file a range and subsequently to file a Rule 424(b) final prospectus with the price per share. The key is to provide the Rule 424(b) final prospectus to investors after the registration statement has gone effective but before confirming orders. This approach rests on Rules 430 and 430C, and the fact that a Section 10(a) prospectus containing the final price would be circulated.
We’re still discussing this option with market participants and will see if it gains broad acceptance. If you are considering using this approach in your IPO, let’s talk.
5. Help! There has been a disclosure development in my IPO after the registration statement was filed. Is the only answer to refile and to start another 20-day period?
Once again, not necessarily. This scenario did not come up in filings during the 2018-2019 shutdown, as far as we know. But in our view, you could reflect the new development by updating investors (either orally or by filing an FWP containing the new disclosure), as well as by including it in the final Rule 424(b) prospectus that would be provided to investors before confirming orders. As with the concept of not using a pinpoint price, this option is still under discussion with market participants.
6. Can I upsize my IPO?
Yes, in our view. In particular, as Securities Act Rules C&DI 240.01 makes clear, if you register a specific number of shares and pay the associated fee under Rule 457(a), you can subsequently sell at a higher price without having to pay additional fees. Again, at the risk of repeating ourselves, this is novel territory and we’ll see if the market gets comfortable with this approach.
7. Must I include a fixed price in a Form S-1/F-1 secondary resale registration shelf?
No, since Rule 415 permits at the market secondary offerings (but not primary offerings) to take place off of Form S-1/F-1.
8. When does my registration statement go effective under Section 8(a)?
Rule 459 lays it out: “the twentieth day shall be deemed to begin at the expiration of nineteen periods of 24 hours each from 5:30 p.m. eastern standard time or eastern daylight-saving time, whichever is in effect at the principal office of the Commission on the date of filing.” To take an example, if you were to file before 5:30 pm on October 10, your registration statement would be effective at 5:30 pm on October 30.
9. If the shutdown ends and the SEC reopens before completion of the Section 8(a) period of 20 calendar days, would we continue the deal as planned?
If the SEC reopens before the 20-day clock runs, deal teams will need to decide how to proceed. Depending on the circumstances, you might press on, or you could change back to a regular-way process involving SEC Staff review and a request for the SEC to declare the registration statement effective. The answer will depend on factors such as how far along the deal has already progressed, how many days remain before effectiveness, whether the Staff requests an amended filing to restore the delaying amendment, etc.
10. If we want to reinstate the delaying amendment, is there an easy way to do that?
Yes. In lieu of an entirely new pre-effective amendment, you can file a one-page letter using EDGAR form type DEL AM to add the standard delaying amendment language required under Rule 473(a). This special form type is designed to facilitate a separately filed delaying amendment under Securities Act Rule 473 to delay effectiveness of registration statement.
