Posted On: Wednesday, January 18th, 2012 at 2:49 pm
As if all that wasn’t enough to keep executives awake at night, navigating the quiet period has become more tricky as companies increasingly use the Web and email for corporate communication. “It’s a remarkable time for the quiet period, given the advent of the Internet,” says Green of the Venture Law Group. “There are a lot of new issues and concerns arising for which the guidelines aren’t quite clear yet.”
For instance, the SEC is reconsidering its approach to pre-IPO information disclosures. As outlined in an 800-page proposal known among those who’ve read it as “the aircraft carrier,” SEC regulators are considering changes that would allow companies to create “multimedia prospectuses” using videocassettes, CD-ROMS, and streaming audio or video files.
The new rules would also allow IPO hopefuls to make more information available to potential investors via “electronic roadshows,” email, and chat room postings. The SEC points out that many investors are kept out of the loop because of the way roadshows are currently structured.
But change comes slowly at the SEC. The agency last revised its statutory regulations on pre-IPO communications in 1954, and the new proposals are unlikely to take effect for another year or two, at least.
Email and other high-tech communications are already wreaking havoc for the SEC and companies involved. One of the most well-known illustrations of the new quiet period perils occurred at Wired Ventures-the erstwhile parent company of both Wired magazine and the HotWired Website. Just before Wired Ventures’ planned 1996 IPO, company CEO Louis Rossetto sent out an email to all his staff, criticizing the “shoddy, if not malicious stories” that were being written about the proposed offering. Though intended to boost employee morale, an out-of-date mailing list directed copies of the e-memo to individuals outside the company. Within hours, the full text of the document was posted to The WELL, the Sausalito, Calif.-based online community that is popular among tech journalists (and which was going through its own quiet period as we went to press). Wired’s IPO was canceled shortly afterward. Though no formal explanation was offered for the decision to cancel the offering, rumors that the errant memo could trigger an SEC enforcement action did little to boost investor confidence.
For all the pitfalls, the quiet period is a convenient barrier to raise. It offers PR-obsessed companies a rare opportunity to turn the other cheek when confronted by unwelcome criticism. “Sometimes, people just don’t want to talk to the press,” laughs the SEC’s Heine. “And that’s when the quiet period provides a very convenient way out.”
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Tags: Internet, investors, multimedia
Categories: Communication