Conclusion of the Road Show and Effectiveness of the
The initial public offering process culminates in the company’s stock trading on the stock exchange on which the stock is listed. Before the company and the underwriters can agree on the price at which the stock will be offered to the public, the offering participants must work in coordination to complete the SEC review process, FINRA’s review of the underwriting arrangements and the stock exchange’s review of the company’s listing ap- plication. The goal is to make sure that these processes conclude before or during the wind- down of the road show. The company and the underwriters work hard to build interest during the road show and hope to price the offering as soon as the road show is completed in order to take advantage of the interest generated.
Events Leading to Pricing
The SEC must declare the company’s registration statement effective in order for pric- ing and trading to occur. Generally, on the day the road show concludes, the company and the managing underwriters ask the SEC to declare the registration statement effective and, once effective, the company sets the price for the IPO.
The SEC’s rules require the company and managing underwriters to request in writing, at least 48 hours in advance of the desired effective time, that the SEC declare the registra- tion statement effective. In addition, FINRA must confirm that it has no objection to the underwriting arrangements before the SEC will declare the registration statement effective. If acceleration is requested at least 48 hours in advance, and the company has addressed the SEC’s comments on the registration statement to the SEC’s satisfaction, the SEC is gen- erally willing to accommodate the requested effective time. Effectiveness orders, the official SEC document declaring the registration statement effective, are now posted on the SEC’s EDGAR website. The company’s registration statement under the Exchange Act—typically a short-form registration statement Form8-A in the case of an IPO—will become effective at the same time as the Securities Act registration statement.