To ease capital-raising, the U.S. Securities and Exchange Commission (SEC) is proposing a rule change to allow all issuers to solicit investor interest in an initial public offering (IPO) before filing.
Currently, only so-called emerging growth companies, which generally include those with less than US$1 billion in annual revenues, can test market interest in an IPO before filing. The SEC proposes extending this capability to all issuers, including investment funds.
It says the proposed changes aim to provide issuers with increased flexibility in their communications with institutional investors.
“Extending the test-the-waters reform to a broader range of issuers is designed to enhance their ability to conduct successful public securities offerings and lower their cost of capital, and ultimately to provide investors with more opportunities to invest in public companies,” says Jay Clayton, SEC chairman, in a news release. “The proposed rules would allow companies to more effectively consult with investors and better identify information that is important to them in advance of a public offering.”
The proposal will have a 60-day public comment period once published in the Federal Register.