By Liz Dunshee
My colleague Broc Romanek – who, as a former staffer, is familiar with the Securities and Exchange Commission’s inner workings – blogged late last week on The Governance Beat about how a government shutdown could affect the SEC and public companies. Since a shutdown can delay capital-raising activities, it’s also a huge issue for anyone with a transaction on the horizon – especially private companies considering an initial public offering.
Even though the stock market stays open during a shutdown, and you can continue to submit filings on the SEC’s electronic site, companies that need the SEC to act on their registration statements or interpretive questions are up against a big logistical problem. That’s the case not just while the staff is furloughed, but also afterward, since they have to work through a backlog of submissions. As Broc pointed out in his blog, we don’t know how long a potential shutdown would last, or whether the SEC workforce would further shrink, causing longer-term processing delays.
Congress still has a small window to reach a deal or pass a continuing resolution. If that doesn’t happen, the good news is this isn’t our first rodeo. The Cooley team has helped companies navigate other government shutdowns – and successful offerings are still possible. From handling complexities with filings and communications to understanding risks and contingency plans, this experience goes a long way.
Here are a few of the issues we can help with:
- Communicating with SEC staff before and after the shutdown.
- Understanding and monitoring affected SEC functions and deadlines.
- Analyzing whether a company could pursue an “emergency relief” exception.
- Timing and compliance issues for registration statement submissions, road shows, offering size and pricing.
- What can be done to keep your IPO on track during the shutdown, and how to use the timing to your advantage.
- How to approach acceleration requests and delaying amendments.
- Whether and how to supplement or amend existing filings.
- Addressing the interplay of Financial Industry Regulatory Authority-related issues with SEC operations.
- Considering unresolved SEC staff comments on filing reviews.
- Readiness for the resumption of normal government activity.
- Alternative capital-raising and exit opportunities.
- Employee and stockholder communications.
- Balancing liability risks and market opportunities.
- Perspectives on market reactions and investor sentiment.
Even though the SEC hasn’t posted a contingency plan yet, we’re very familiar with how the operations plan and FAQs it shared earlier this year would affect capital raising, and it’s reasonable to expect at least some of those to roll forward either formally or informally. For companies thinking about public offerings this year or early next year, it’s critical to get your arms around what a shutdown could mean for your specific situation and timing and plan accordingly.
