THE COMMENT PROCESS IN GOING PUBLIC
THE COMMENT PROCESS IN GOING PUBLIC
When a review team in one of the Assistant Directors of Corporation Finance receive an S-1 IPO registration statement for review, an initial quick review is undertaken to make sure that the required audited and unaudited financial statements are included. Those financial statements have to be audited for the past three full fiscal years and unaudited for the quarterly periods from the end of the last fiscal year up to the last quarter before the filings. If these required financials statements are not included, the entire filing will be bounced and the company will get a letter stating that the filing will not be reviewed until it is remedied.
In nearly all cases, this does not occur, and the staff reviewing team reviews the S-1. Not only does the staff use checklists to see if the statutorily required disclosures are all present, the adequacy of the disclosure is reviewed. The staff is subject to an internal SEC requirement to turn around comments to the company within 30 days. In the past few years, the SEC has decided to adapt to modern times and adopted the use of email to send comments.
Comment letters follow a pattern. Most importantly, comments are numbered and organized primarily starting at the beginning of the S-1, with accounting comments at the end. The company is not under an obligation to respond to the comments within any time period, but, the sooner the company provides a response, the more quickly the entire review can be completed. Usually, a company that has never before filed anything with the SEC goes through 3 or 4 rounds of comments, and the S-1 for the IPO goes effective within 3 or 4 months of filing.
