The IPO quiet period is now a little less quiet—at least for emerging growth companies (EGCs).
Since 2003, FINRA rules have prohibited research coverage by analysts employed by a company’s underwriters for prescribed periods of time following an IPO (40 days for analysts employed by the offering’s managing underwriters and 25 days for analysts employed by other underwriters participating in the IPO) and within 15 days prior to or after the expiration, termination or waiver of the IPO lockup period. These restrictions apply to traditional research reports as well as analyst public appearances, such as at conferences, in which a recommendation or opinion regarding the company’s common stock is offered.
The JOBS Act eliminated research quiet periods within any prescribed period of time following an IPO by an EGC or prior to the expiration date of the company’s IPO lockup period. In subsequently interpreting and implementing this portion of the JOBS Act, the SEC and FINRA eliminated all research analyst quiet periods prior to or after the expiration, termination or waiver of lockup periods in connection with IPOs by EGCs. As a result, effective October 11, 2012, there are no research analyst quiet periods in connection with IPOs by EGCs. FINRA’s research analyst quiet period rules remain applicable to IPOs by other companies.
The most important consequence of this change is that research analysts employed by the underwriters of IPOs by EGCs can now publish reports immediately after a company’s initial earnings release even when the earnings release occurs within 25 days after the offering. Previously, if an earnings release fell in this time period, the underwriters could not provide immediate research coverage. In addition, “booster shot” provisions, which automatically extend the IPO lockup period in the event of an earnings release (or other materials news event) within 17 days prior to or after the expiration, termination or waiver of the lockup period, are no longer needed in EGC lockup agreements.