A preliminary prospectus that is used to make written offers must include a bona fide estimate of the offering price range and the number of shares to be offered. Historically, the SEC staff's view has been that the price range's spread (the difference between the bottom and the top of the range) could not exceed $2.00 when the top of the range is $20.00 or less and could not exceed 10% of the top when the range exceeds $20.00.

Last week, the Director of the Division of Corporation Finance announced that the staff would now permit the spread to be as large as the greater of $2.00 or 20% of the top of the range. This change will provide IPO companies with greater latitude in establishing price ranges, which can be particularly important in volatile market conditions. For example, in an offering expected to be priced in the low to mid teens, a range of $12-15 is now permitted, whereas previously the range could only be $12-14 or $13-15.