The web to play a bigger role in public offerings

The Wall Street Journal reports that communication among investors, Wall Street stock underwriters and issuers are in for major modernization, if plans by the US Securities and Exchange Commission are approved this year.

The Journal reports today on proposals by the SEC for enabling greater use of the internet to faciliate the dissemination of information regarding initial public offerings of stock:

[…] issuers and investment bankers would be able to forgo sending final offering prospectuses to IPO investors. Under the SEC’s proposal, issuers would still have to distribute preliminary prospectuses to potential investors in the same way they do now. But realizing that most investors get offering documents electronically anyway, the SEC is seeking to allow issuers to email investors when a deal is priced, telling them their allocations and pointing out that a formal prospectus would soon be filed with the SEC.

The old rules are more pen and paper than point and click. US securities laws strictly regulate written material surrounding a stock offering. But that often causes problems. For instance, oral communication in roadshow meetings isn’t regulated. As long as company executives aren’t committing fraud, they have wide latitude in what they can tell their audiences.

But if a company wants to broadcast that same roadshow on the Internet, suddenly it becomes a written communication. That means all the information disseminated by executives has to be covered in the offering documents filed with the SEC.

The Journal says the SEC is proposing to formally allow internet broadcasts of marketing roadshows. These online broadcasts would be open to all investors, not just to the chosen few invited to closed-door events. In fact, the new rules would tacitly encourage broad internet roadshow dissemination, the Journal says, giving companies that open them to the public a break from certain filing requirements.

Wall Street Journal | SEC Proposes Increasing Role Of Web in IPOs (paid subscription required)

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