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Pre-IPO Talks With Potential Investors Allowed in House Bill

By Jacob Rund
August 13, 2018
Bloomberg BNA

Pre-IPO Talks With Potential Investors Allowed in House Bill

By Jacob Rund
August 13, 2018
Bloomberg BNA

Read below

Keli Whitlock
Keli Whitlock

Unicorns such as Uber Technologies Inc. and Airbnb Inc. soon could be allowed to gauge the interest of big-time investors before taking the plunge into public markets, an option that may give them a better sense of when the time is right for an initial public offering.

It’s a rule change Congress is considering as part of an update to the Obama-era JOBS Act aimed at increasing small businesses’ access to capital. One provision in the package (S. 488) would allow a broad swath of companies to talk to potential backers about an IPO.

Private companies could “actually ask” whether investors might bite on an IPO at the price they’re looking for, Keli Whitlock, a partner at Duane Morris LLP who advises on corporate and securities transactions, told Bloomberg Law. “So [they] don’t have to guess.” …

“It’s really expensive to have an IPO, and if you don’t have enough institutional interest, it’s not going to go,” Whitlock said. By knowing that ahead of time, “you don’t need to spend all that money and disclose all of that information.” …

Some large, popular companies opt to stay private because there is “some concern that the huge uptick in value” occurs before they make it to an IPO, which isn’t good for would-be public investors, Whitlock said. …

“It could take some of these companies like Uber and others that have large revenues, and it might encourage them to conduct an IPO,” Whitlock said. The concept becomes particularly attractive when coupled with a new SEC process that allows draft offering documents to remain private, she added. …

To read the full article, visit the Bloomberg BNA website.