A provision of the Jumpstart Our Business Startups Act, commonly known as the JOBS Act, allows emerging growth companies (startups with less than $1 billion in annual revenues) to file S-1 statements secretly with the SEC, allowing startups to conceal their plans to go public from the general public.
While the documents related to these filings do have to be made public 21 days before any road shows or pitching to investors and analysts, it does allow them a window of time to remain confidential should they change their mind early on in the process.
Jeff Vetter, a securities attorney with Fenwick & West, says, “If the market window closes while you’re on file, this prevents you from being seen as damaged goods.”
He went on to say that, “some registration statement can be out there for a long time and that can potentially taint a company.”
Vetter says he expects that these secret S-1 filings will become routine, saying, “Most of our clients who are talking about proceeding with an IPO are looking to take advantage of confidential filing.”