Kraig Biocraft Laboratories Inc (KBLB)

[TRUISM]

Making Noise In The Quiet Period

The Quiet Period.


The SEC requires that when a company begins the IPO process it operates in what is called a quiet period. The beginning of that process is generally defined as the point at which the company retains investment bankers for the IPO.

Like most government regulations, the official definition of quiet period is about as clear as mud. But it generally means that all relevant information about the company of interest to potential investors be contained entirely in one place – the Prospectus (S-1 filing), that the SEC reviews and approves.

Any new and material information the company provides elsewhere at this time (e.g., in a media interview or conference presentation) is considered a violation. Even confidential employee communications are subject to these guidelines, as was witnessed in 2011 when Groupon was sanctioned (for a second time) by the SEC for financial claims made by CEO, Andrew Mason in an internal memo.



What Is Permitted.


The quiet period does not mean companies must refrain from speaking at all during this time, which can last 3 to 4 months. They couldn’t effectively operate if that were the case. So what can they do and where are the boundaries?

For starters, companies are allowed to continue normal course of business communication which generally covers basic external marketing and typical internal communication. But it also underscores why it is important to establish a practice of active communication before the IPO.

If you don’t regularly send out press releases or do media interviews around product announcements, data reports, new hires or other basic company developments, it’s tough to claim they were normal course of business communications during a quiet period.



What Is Not Permitted


More importantly, the SEC is concerned about what is said and who is saying it. The primary restrictions concern any substantive commentary about the business, its performance or financial results, future prospects or major developments such as new customers, updates on litigation, entering new markets, etc.

All of that information needs to be contained in the S-1. Anything that is not should not be discussed publicly.

While some companies will publicly acknowledge they are in the IPO process (even if their filing is still confidential), it is generally frowned upon to comment on the offering itself. And the comments of company executives and board members are particularly scrutinized.

It is critical that companies going through an IPO educate their executive team and board — and all employees once the IPO is made public — about the rules and restrictions on communication.

Spokespeople engaging in media interviews or speaking at public events must be coached very carefully on how to answer questions and avoid commenting on topics that will get them in trouble. For senior executives that is nearly impossible, so they should refrain from interviews prior to the IPO.


Making Noise In The Quiet Period-May 31, 2019

TRUTH