Understanding IPOs – How long can an issuer maintain EGC status? – (7)

the last day of the issuer’s fiscal year following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under the Securities Act (for a debt-only issuer that never sells common equity pursuant to a Securities Act registration statement, this five- year period will not run);
any date on which the issuer has, during the prior three-year period, issued more than $1 billion in non-convertible debt; or
the date on which the issuer becomes a “Large Accelerated Filer,” as defined in the SEC’s rules.
If an EGC loses its status as an emerging growth company, the status cannot be reestablished.
With regard to the $1 billion debt issuance test, the SEC Staff clarified in the General Applicability FAQs that thethree-year period covers any rolling three-year period and is not limited to completed calendar or fiscal years. The SEC Staff also noted that it reads “non- convertible debt” to mean any non-convertible security that constitutes indebtedness (whether issued in a registered offering or not), thereby excluding bank debt or credit facilities. The debt test references debt
“issued,” as opposed to “issued and outstanding,” so that any debt issued to refinance existing indebtedness over the course of the three-year period could be counted multiple times. However, the SEC Staff also indicated in the General Applicability FAQs that it will not object if an issuer does not double count the principal amount from a private placement and the principal amount from the related Exxon Capital exchange offer, as it views the subsequent exchange offer as completing thecapital-raising transaction.

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