Subject to improvement and expansion in subsequent editions, dated March 15, 2024
Global IPO Guide
2024 EDITION
_______________________________________
Initial public oering of: a sizeable number of ordinary shares
Oer price per share: stated in local currency
This is our global initial public oering guide. It will help you navigate the US portion of a global IPO – in other
words, an IPO in which you sell locally listed ordinary shares to investors outside the United States under
Regulation S, and to investors inside the United States in private transactions without registration with the
US Securities and Exchange Commission. The US investors in global IPOs are usually large US institutional
investors known as qualied institutional buyers, or QIBs, purchasing under Rule 144A or another exemption
from the registration requirements of the Securities Act.
Prior to the oering, there will have been no US market for your ordinary shares, but we will help you
understand what will be required of you from the US perspective. We want your global IPO to go o as quickly
and as smoothly as possible, without any unpleasant surprises.
The underwriters are crucial players in conducting any successful oering. You and your counsel will be
spending lots of quality time with them, their counsel, and your auditors.
_______________________________________
Undertaking an IPO involves risks. See “Summary” beginning on page 1 to read about common pitfalls and
how good advance planning and legal advice can help you avoid them.
Depending on your jurisdiction, closing of your oering should occur anywhere from 90 days to one year after
you say “go.”
No regulatory body in any jurisdiction has approved or disapproved of this guide, or passed upon the accuracy
or adequacy of this guide, but we hope it will make the global oering process less mysterious and the goal of
reaching a larger investor base more attainable.
_______________________________________
Joint Global Co-ordinators
Athos Investment Bank
(a division of Athos & Co.)
Porthos Securities
International
Aramis
Limited
Joint Bookrunners and Joint Lead Managers
D’Artagnan Ltd Porthos Securities
International
Aramis Limited
The information in this guide represents only a fraction of our accumulated expertise in international capital markets transactions and does not constitute
legal advice. Never hesitate to check with us for up-to-the-minute guidance.
iTable of Contents
Summary .....................................................................................................................................................1
The Global IPO Business ...........................................................................................................................7
Securities Act of 1933 and Securities Exchange Act of 1934 ..............................................................7
Foreign Private Issuers ........................................................................................................................7
Global IPO Structure – Regulation S, Rule 144A, and Traditional Private Placement Transactions ...7
Regulation S ........................................................................................................................................8
Background .....................................................................................................................................8
Rule 903 ..........................................................................................................................................8
Rule 144A Transactions .......................................................................................................................9
Section 4(a)(2) – Traditional Private Placements ................................................................................9
Regulation D Private Placements ......................................................................................................10
Restrictions on Communications During the Global IPO Process ..................................................... 11
Oshore Press Activity – Securities Act Rule 135e ....................................................................... 11
Research Reports ..........................................................................................................................12
Global IPO Financial Statements ............................................................................................................15
What Financial Statements Must Be Included? .................................................................................15
The Basic Requirements for US Public Oerings .............................................................................. 15
When Does Financial Information Go “Stale”? ..................................................................................17
MD&A .................................................................................................................................................17
Recent and Probable Acquisitions .....................................................................................................18
What Is a “Business”? ...................................................................................................................19
What Is “Probable”? .......................................................................................................................19
Signicance Tests ..........................................................................................................................19
Financial Statements Required in Connection With Acquisitions ..................................................20
Exceptions to the Requirement to Provide Financial Statements of Acquired Businesses ........... 21
MD&A for Acquisitions ...................................................................................................................21
Pro Forma Financial Information ...................................................................................................21
Industry Guides ..................................................................................................................................23
Additional Financial Information That Is Typically Included ...............................................................24
Liability Under the US Federal Securities Laws for Global IPOs ......................................................... 29
Registration – Section 5 of the Securities Act ....................................................................................29
Antifraud ............................................................................................................................................29
What Is “Material”? ............................................................................................................................29
Fraud in Connection With the Purchase or Sale of Securities – Rule 10b-5 .....................................30
Elements of a Claim Under Rule 10b-5 ......................................................................................... 31
Scope of Rule 10b-5 ......................................................................................................................31
Insider Trading ...............................................................................................................................31
Damages Under Rule 10b-5 ..........................................................................................................32
Extraterritorial Application of Section 10(b) and Rule 10b-5 .......................................................... 32
Controlling Person Liability ................................................................................................................32
Enforcement ......................................................................................................................................33
Legal Matters ............................................................................................................................................36
Where You Can Find More Information ..................................................................................................36
Report of Non-Independent Editors ........................................................................................................37
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1Summary
THE LATHAM GLOBAL IPO GUIDE
SUMMARY
This Summary does not contain all of the information that you will need to successfully complete your global IPO.
You really should read this entire guide as well as the other Latham & Watkins publications referred to in this
guide if you want to get the full picture. Actually, you should just hire Latham & Watkins to act as your international
counsel and then you will not need to read any of this stu. However, if you want an advance copy of the playbook
and are not yet ready to choose your counsel, you can read this Summary and get a pretty good sense of what to
expect in the global IPO process. Because this guide covers many dierent jurisdictions, the specic requirements
and timing can vary considerably.
Our Mission
We are among a select group of leading IPO law rms in the United States – having been a market leader in
every year since 2010. Between 2021 and 2023, we advised on more than 275 IPOs globally, helping companies
raise more than $217 billion. Our mission in this guide is to arm you with a thorough overview of the US aspects
of the global IPO process, including practical tips gleaned from our unparalleled experience in the trenches. This
guide is dierent from any other guide you might come across, because we do more than just recite the rules –
we share the secret sauce. We believe that our leadership position in the IPO market positions us to give you the
practical advice you need to navigate the global IPO process successfully.
The Preliminary Checklist
Even before the organizational meeting that kicks o the global IPO process, you will want to start grappling with
a number of key issues. These include the following:
• Which banks will be joint global coordinators and who will be your other underwriters? You probably already
have a relationship with potential underwriters, and you may be thinking of adding others to the syndicate.
The joint global coordinators, or JGCs – the underwriters whose names are listed above the other banks on
the prospectus cover – will take the lead for the IPO. The other underwriters listed on the prospectus cover
page will also play an active role in the process.
• Is the right audit team in place and are the auditors ready to go? Your underwriters will require accountants’
comfort letters covering the nancial statements. Non-US companies with smaller local auditors sometimes
nd their existing auditors are not experienced in these matters or are not enthusiastic about the prospect of
their audit being part of an oering document that goes to US investors. Some companies decide to switch to
a larger international accounting rm or add one to the team in order to gain from the experience the larger
rm has amassed. Obviously, these decisions have timing and cost implications.
• Do you have the right international law rm in your corner? A global IPO is a complex undertaking requiring
the coordination and reconciliation of legal requirements across several jurisdictions. A strong, experienced
international legal team can ensure that local and international counsel are working together, avoiding
unpleasant surprises, and reducing the burden of the IPO drill on management. This is important because the
management team will still be obligated to run the business during the time-consuming IPO process. As with
your auditors, you will want to make sure you and your underwriters choose a law rm that is the right t.
• Are the nancials ready for prime time? Although your global IPO will not be registered with the SEC, your
underwriters will want to use the SEC’s nancial statement requirements for US public IPOs as the starting
point for dening the package of nancial information that will go to investors. Topics such as nancial
2 Latham & Watkins – Global IPO Guide
statements for recent signicant acquisitions, nancial statements for certain signicant subsidiaries, segment
treatment, and the like can be time-consuming to address.
• Do you have a communications plan in place? US law imposes strict limitations on communications around
a planned global IPO. These rules can cause signicant friction, especially for companies that are used to
being transparent and have active PR programs. On the other hand, violations of the SEC’s communications
restrictions – often called “gun jumping” – can cause an oering to be delayed for weeks or even months.
You will need to ensure you have a plan in place to prevent unauthorized public statements during the public
oering process.
• Will there be cornerstone or anchor investors? Investors who agree to buy in a concurrent oering
(cornerstone investors) or those who agree in advance to buy a portion of the IPO (anchor investors) are
a common feature of global IPOs in Asia. You will need to build in time to negotiate and document these
arrangements.
• Is quarterly data available? Some underwriters will want to see selected quarterly data for the most recent
eight quarters in your oering document. You will want to anticipate the need for quarterly data before the
rules or the banks require it so that you can have it prepared and scrubbed by your accountants well before
you need it.
• Will there be any industry data? You may need to commission industry reports, which can take time to compile
and diligence.
• Will forecasts be prepared for disclosure to investors? Some jurisdictions require forecasts to be given to
investors, which may require auditor sign-o.
• Are you ready for life as a public company? Will changes need to be made to ownership structures,
shareholder agreements, employment arrangements, and the like? Will it be necessary to hire a treasurer, a
general counsel, an investor relations ocer, or other individuals with public company experience? Are you
ready to start turning out nancial statements on the timeline required of public companies? Will revisions be
needed to bring executive compensation arrangements in line with public company practices and those of key
public competitors? Do you have appropriate internal controls in place?
The Global IPO Timeline
It is important to understand the “how to” aspects of going public so that you know what to expect over the
next few months and can stay one step ahead of the issues. While the precise timeline will of course vary from
jurisdiction to jurisdiction, here is an indicative list of the key milestones in a global IPO:
Day
1
7 – 14
Days
30 – 60
Days
30 – 60
Days
60 – 90
Days
61+
Days
Day
T+1
Day
T+2
Day
T+3 – 12
Org Meeting File Red
Herring
with Local
Regulator
Update Offer
Document
Respond to
Comments
from Local
Regulator
Submit Offer
Document
to Local
Regulator
Commence
Road Show
Pricing
Occurs
Trading
Begins
Close IPO
There is simply no substitute for good preparation. First impressions are important, and you want (need) to know
what is coming so you are ready when it arrives.
The First Month. Some of the most important decisions you will make during this process will be made right at
the outset, even before the organizational meeting. These include selection of:
• Your JGCs
3Summary
• Your local and international counsel
• Your auditors
• Any other third-party experts or consultants your jurisdiction might require, including industry consultants
The quality of the team you assemble will have a major impact on the rest of the process and, perhaps, the
success of your global IPO. Take the time to get this part right. You will want to build a team of bankers, lawyers,
and auditors who have experience with global IPOs and, ideally, with your industry. IPO issuers may even
interview law rms to propose as counsel for their underwriters. (If there is going to be just one international
counsel, they will represent the underwriters.) Experienced bankers, lawyers, and auditors will be more ecient
with your time and get you to market when conditions are optimal. They are informed about, and will focus on,
what matters to investors.
The organizational meeting is the ocial kicko of the IPO process. It is attended by all of the professionals
we mentioned above and most of the company’s executive ocers. However, you will not want to use the org
meeting to start getting organized – you should begin that process well before the org meeting. Ideally, a month
or so before the org meeting, you will have selected international counsel, identied the three or four most useful
precedent global IPO lings by comparable companies (the “comps”), and started working to esh out a rough
draft of the oering document so that you are ahead of the curve by the time the org meeting arrives. It is never
too soon to start discussing the content of the road show with your underwriters since the information in the road
show should also be consistent with the oering document. If you start ahead of the curve, you can stay in control
of the process from beginning to end. If you start behind, you will be on your heels for the duration.
The org meeting also marks the beginning of the legal, business, and accounting due diligence process. The
underwriters will engage in a thorough due diligence exercise designed to provide a reasonable basis to believe
that the oering document and the other oering materials such as the road show presentation are free of material
misstatements and omissions. Underwriters take due diligence very seriously, for both liability and reputational
reasons. The due diligence process starts with a detailed management presentation about the business (usually
at the org meeting) and continues through all of the drafting sessions and right up to the closing.
In addition to meeting with management, the underwriters will frequently conduct site visits to the company’s
principal facilities and interview key customers and business partners. Counsel for underwriters will also conduct
a comprehensive review of the company’s business and operating plans, corporate records, material contracts,
litigation, and intellectual property. The review will proceed more smoothly if the relevant documents are
assembled in advance and made available in a physical or virtual data room. Finally, the underwriters will ask
you to prepare a binder of evidence to support the accuracy of certain factual assertions in the oering document
(such as market share, size of market opportunity, and recent industry awards). Compiling these materials can be
a time-consuming process and will slow you down if left until the end.
The Second Month. Most of the second month will be spent working to nalize the disclosure in your oering
document and helping the underwriters with their due diligence drill. The oering document contains nancial and
non-nancial disclosure.
Here is a brief summary of the typical contents of an oering document in a global IPO:
• The Box. A summary of the information that is contained in the oering document will appear at the beginning
of the oering document on pages that are marked with a box border (like this page), which is why the
summary section is referred to as the summary box, or the “box.” In IPO drafting sessions, the working group
will spend considerable time drafting the box since it is at the beginning of the oering document and sets
out the issuer’s story and value proposition in a few easy-to-read pages. Typically, the summary box will
include the following headings: Company, Industry, Competitive Strengths, Business Strategies, Risk Factors,
Oering Summary, and Summary Financial Data.
4 Latham & Watkins – Global IPO Guide
• MD&A/OFR. The oering document will contain a “management’s discussion and analysis” section
(sometimes called an “operating and nancial review”), which discusses the issuer’s nancial results and
condition. The purpose of the MD&A is to provide investors with the information necessary to interpret the
issuer’s operating results and nancial condition through the eyes of management. It is the place where
management explains the issuer’s nancial statements to investors. A well-written MD&A will identify the
key drivers of the issuer’s results of operations and focus on trends and uncertainties in the marketplace. It
will explain the issuer’s business as management sees it, separately discussing each operating segment’s
performance as well as the business as a whole. It will also identify and discuss the key performance
indicators, or KPIs, that management uses to evaluate the performance and nancial health of the business.
In addition, MD&A sections often incorporate a comprehensive analysis of the issuer’s future prospects,
typically presented under a subheading such as “Outlook.” Drafting the MD&A requires close cooperation
among the issuer’s nancial team, its accountants, and legal counsel and can be a time-consuming process.
• Business. The Business section of the oering document contains a detailed description of the issuer’s
business. It will include the text about the business from the summary box (including competitive strengths
and business strategies) as well as a raft of more granular information about the issuer’s principal products
and services, the location of its primary facilities, the number of its employees, and the like. If the issuer’s
business is regulated, there will be a summary of key regulation. If the issuer is involved in material litigation
or is subject to other material contingent liabilities, those will be described. The Business section is intended
to be the full story about the issuer’s operations.
• Risk Factors. The Risk Factor section gives you a chance to warn investors about risks and challenges
that may result in bad news in the future. It is the place to manage investor expectations. We think of these
cautionary disclosures as insurance. The buy side is rarely put o by risk factor disclosure (they are usually
aware of the risks) but the risk factors often provide important legal protection should risks come to roost after
the closing. Don’t fret. It is typical for the risk factors to go on for several pages and to sound quite negative.
Mitigating language is not included in the risk factor disclosures.
The Third Month. Here are the projects that will be taking your time during the third month:
• Management’s Model/Analyst Day. The research analysts at your syndicate banks will want frequent chances
to meet and speak with you to discuss your company, its businesses and its strategy, and – where permitted
– to review management’s projections for the next several years (typically quarter-by-quarter for the next two
years and then year-by-year for another year or so thereafter). A group meeting with the syndicate analysts
will take place, usually referred to as “analyst day.” Unlike the investment bankers who have been helping
you prepare your oering document, the research analysts do not work for you. They are independent and
the research they prepare must reect their personal views, without inuence or pressure from investment
banking, issuer management, or other external forces. Your meetings with research analysts are very
important because these analysts are going to help educate the market about your company once the
transaction has launched. You will want to be well prepared for analyst day and any follow-up meetings with
analysts after this rst meeting. Management should look to deliver a clear and concise articulation of the
company’s story on analyst day and be ready to answer detailed questions about the management model.
While the investment bankers can help you prepare for the analyst meetings, regulatory restrictions limit the
information that they can share, and the interactions they can have, with research analysts. The bottom line
is that you want to provide the syndicate analysts with the information they need to formulate a well-informed
perspective on your business.
• The Underwriting Documents. In a global IPO, the underwriting documents are a suite of related agreements
needed to close the transaction. There may be a domestic and an international underwriting agreement
complemented with option and share lending agreements. The underwriting agreements have a brief moment
in the limelight between the end of the road show when they are signed and the IPO closing. An underwriting
agreement is probably unlike any other agreement you have seen in any other transaction, and at rst glance
5Summary
may strike you as somewhat one-sided. Don’t let that put you o – most of the pages of an underwriting
agreement exist to assist the underwriters in carrying out their due diligence drill (you can think of the reps
and warranties as a series of questions designed to uncover potential disclosure issues). As a result, there
are only a few real business points in the whole agreement, and negotiating it should not be a particularly
adversarial or time-consuming process.
• The Lock Up. The issuer’s existing shareholders, directors, ocers, and option holders will typically be
asked, and in some jurisdictions required, to agree not to sell any of their shares during a period following the
oering, which may vary according to local regulation but is otherwise 180 days. There is room to negotiate
exceptions to the lock up – for estate planning and charitable giving, for example – and these exceptions will
need to be nalized before the start of the road show. The underwriters will require that the signed lock-up
agreements be delivered prior to the launch of the road show.
• Preparing the Road Show Slides. Ideally, you have been thinking about the content of the road show since
you started drafting the oering document because the content of the road show must be consistent with,
and should largely be drawn from, the contents of the oering document. However, distilling your story into a
30-minute pitch can be challenging. The road show slides will receive plenty of attention, as they should since
the road show is at the very center of the marketing process.
• Finalizing Valuation. Obviously, this is where the action is. You will not typically ll in the targeted price range
until the day you start your road show or when the IPO bid period commences, but you will be discussing
valuation with your bankers right up until that moment. Once a valuation is determined, you and the bankers
may consider a stock split to try to get the proposed price within a desirable range. They will be watching the
trading prices of the comps (if there are any publicly traded comps) and discussing the appropriate new-issue
discount with each other and with you.
• Finishing Everything Else. You will not have much free time once the road show starts so you will want to
make sure you have all of the loose ends tied down before you hit the road. Anything on the to-do list for the
second month that didn’t actually get done in the second month will need to be completed before you can
start the road show.
The Road Show, Pricing, and Closing. Road shows are both fun and grueling. You may be expected to cover
both the East and West Coasts of the United States (and possibly a few places in between). You should expect
the CEO and CFO to give two full weeks to this part of the process.
The road show begins with a “teach-in” to the sales forces of each of the lead underwriters and continues through
a series of group meetings (typically lunches) with buy-side institutional investors and one-on-one meetings with
the largest institutional investors. Retail investors usually see a video recording of an early road show meeting,
which is made available on the internet to anyone interested. On the road show, the underwriters are building an
order book of indications of interest from investors, which helps them gauge the level of demand for your stock.
The bookbuilding process will result in a pricing recommendation (how many shares can be sold and at
what price) by the underwriters. Once the deal has priced, you will sign the underwriting agreement, and the
underwriters will commit to buy all of the shares being oered at a discount to the “price to public” in the oering.
(In some markets the IPO is structured as a direct sale to the investors, for local tax and regulatory reasons.)
The underwriters will then immediately resell the shares at the price to public appearing on the front page of
the oering document to the investors who have been allocated shares (referred to as conrming orders). The
dierence between the discounted price the underwriters pay for your stock and the public oering price – the
“gross spread” – is the underwriters’ payment for their services. Your stock will open for trading the next morning.
Three to twelve business days later, the oering will close and you will receive the net proceeds from your global
IPO. Finally, you will be able to go back to running the business and working hard to meet the growth expectations
you signaled the market to expect.
6 Latham & Watkins – Global IPO Guide
A Note About Research Analysts. Subject to any restrictions imposed by local law on sharing projections,
the research analyst at each of your JGCs will create his or her own nancial model based in part on what
he or she learns on analyst day and in subsequent one-on-one diligence sessions with you. The analysts will
have myriad questions about the company, its business, its strategy, and the management model, and each
analyst will produce his or her own proprietary model, which can be expected to dier in some ways from
the management model. You will not typically share projections with potential global IPO investors during the
road show and some jurisdictions will not allow projections to be included in the analyst’s research report, but,
where permitted, the analysts may verbally discuss their proprietary models with potential IPO investors once
the oering has launched. The analysts’ models may include growth rates and margin assumptions specic to
your business as well as other metrics based on your industry. It is important to ensure that the analysts are not
basing their projections of future growth or protability on outdated, inaccurate, or incomplete information, as the
information that you provide will be the basis for many of the assumptions that they make and share with buy-side
clients during this investor education process.
Corporate Information
Our principal executive oces do not exist. We have a one-rm approach with no headquarters. Instead, we have
over 2,600 attorneys practicing in 60 international practice groups and industry teams spread out over oces in 14
countries. We have over 450 attorneys in our capital markets practice group. We started our rm the same year
that the US Congress created the SEC (in 1934) and have been the leading IPO rm since 2010. Given how long
we have been at this, we believe we have seen it all and doubt you have a problem we have not tackled before.
Our website address is www.lw.com. Information contained on, or that can be accessed through, our website is
enthusiastically incorporated by reference into this Global IPO Guide, and all of it is yours for the taking. We look
forward to working with you on your global IPO.
7The Global IPO Business
THE GLOBAL IPO BUSINESS
There are a few primary US federal statutes and concepts that we will be talking a lot about in this guide. Here is
a brief summary to get things started.
Securities Act of 1933 and Securities Exchange Act of 1934
The two Depression-era federal statutes at the center of our discussion are the US Securities Act of 1933 and the
US Securities Exchange Act of 1934. The Securities Act generally governs the initial oer and sale of securities
in the United States. The Exchange Act generally regulates the post-issuance trading of securities, the activities
of public companies, including reporting obligations and M&A transactions, and the activities of other market
participants (such as underwriters).
The SEC, the regulatory body in charge of the Securities Act and the Exchange Act, has issued a comprehensive
body of rules and regulations under those Acts that have the force of law. The SEC and its Sta have also
provided interpretive guidance on a wide range of questions under the securities laws.
Foreign Private Issuers
If you are contemplating a global IPO, you are very likely to be a foreign private issuer, or FPI. That is a term of
art in US securities regulation, and means an entity (other than a foreign government) incorporated or organized
under the laws of a jurisdiction outside of the US unless:
1
• more than 50% of its outstanding voting securities are directly or indirectly owned of record by US residents;
and
• any of the following applies:
− the majority of its executive ocers or directors are US citizens or residents;
− more than 50% of its assets are located in the United States; or
− its business is administered principally in the United States.
It is always prudent to conrm your status as an FPI at the very outset since the regulatory regime for companies
that do not meet the FPI test is quite dierent in a number of crucial respects.
PRACTICE POINT
An issuer that has more than 50% US ownership can still be a foreign private issuer. In order to fail to qualify
as a foreign private issuer, a company needs to be both majority owned by US residents and meet any one of
the three additional tests noted above.
Global IPO Structure – RegulationS, Rule144A, and Traditional Private
Placement Transactions
Global IPOs that are not registered in the United States with the SEC are typically structured to take advantage
of a combination of exemptions. The portion of the transaction sold to investors outside the United States will
be designed to comply with the safe harbor for oshore transactions provided by Securities Act Regulation S. At
the same time, the portion sold to US investors will be structured to comply with the safe harbor of Securities Act
Rule 144A for resales to qualied institutional buyers (QIBs), the private placement exemptions of Section 4(a)(2)
of the Securities Act, or Securities Act Regulation D.
We discuss these exemptions in the following page.
8 Latham & Watkins – Global IPO Guide
RegulationS
Background
Regulation S provides a safe harbor from Securities Act registration requirements for certain oerings outside
the United States and oshore resales of securities. If the conditions of Regulation S are met, the transaction
is deemed to take place outside the United States and hence does not trigger the registration requirements of
Section 5 of the Securities Act.
2
The basic requirements (we refer to them below as the Regulation S Basic Conditions) are that:
• the oer or sale must be made in an “oshore transaction;” and
• there must be no “directed selling eorts” in the United States.
An “oshore transaction” is dened as an oer that is not made to a person in the United States, and either:
3
• at the time the buy order is originated, the buyer is outside the United States, or the seller (and any person
acting on the seller’s behalf ) reasonably believes that the buyer is outside of the United States;
• for purposes of the issuer safe harbor, the transaction is executed in, on, or through the physical trading
oor of an established foreign securities exchange located outside of the United States (this would be a rare
occurrence today); or
• for purposes of the resale safe harbor, the transaction is executed in, on, or through the facilities of a
designated oshore securities market, and neither the seller (nor any person acting on the seller’s behalf)
knows that the transaction has been prearranged with a buyer in the United States.
The term “directed selling eorts” is dened broadly to include any activities that have, or can reasonably be
expected to have, the eect of conditioning the market in the United States for the securities being oered in
reliance on Regulation S.
4
Prohibited eorts include mailing oering materials into the United States, conducting
promotional seminars in the United States, granting interviews about the oering in the United States (including
by telephone), or placing advertisements with radio or television stations broadcasting in the United States.
5
Importantly, selling activities in the United States in connection with concurrent US oerings do not constitute
directed selling eorts.
6
More generally, oshore transactions in compliance with Regulation S are not integrated
with registered or exempt US domestic oerings.
7
Rule 903
Rule 903 of Regulation S provides a safe harbor for sales by issuers, “distributors” (essentially, entities that act
as underwriters for the issuer), and most aliates of the issuer (other than certain ocers and directors). Bear in
mind that the term “aliate” is dened very broadly, and it is not always simple to determine precisely who is and
who is not an aliate.
Under Rule 903, there are three levels or “categories” of requirements, with Category 1 being the least
burdensome and Category 3 being the most restrictive. Global IPOs by FPIs will typically fall into Category 1.
Category 1 has no requirements other than to comply with the Regulation S Basic Conditions. It is available for:
• securities oered by foreign issuers
8
who reasonably believe at the commencement of the oering that there
is no “substantial US market interest”
9
in the securities oered;
• securities oered and sold in an “overseas directed oering;”
10
• securities backed by the full faith and credit of a foreign government; or
9The Global IPO Business
• securities oered and sold pursuant to certain employee benet plans established and administered under the
laws of a foreign country.
Rule 144A Transactions
Although market participants often refer to Rule 144A oerings, as a technical matter most Rule 144A transactions
involve two steps: Sales to initial purchasers under an exemption such as Regulation S or Regulation D
(discussed below), followed by resales to QIBs under Rule 144A. As a result, Rule 144A transactions follow
various limitations not found directly in Rule 144A itself as well as the explicit requirements of Rule 144A.
PRACTICE POINT
Securities purchased under Rule 144A are deemed restricted securities and can only be resold pursuant to
Rule 144A or another exemption (including the Regulation S resale safe harbor).
11
The requirements for a valid Rule 144A transaction include:
• Sales to QIBs: the securities must be oered and sold only to QIBs or to a person who the seller (and any
person acting on its behalf ) “reasonably believes” is a QIB; and
• Notice to buyers: the seller (and any person acting on its behalf ) must take “reasonable steps” to ensure
that the buyer is aware that the seller may be relying on Rule 144A (generally by so noting either in the
oering document or, in the case of an undocumented oering, in the trade conrmation).
Section 4(a)(2) – Traditional Private Placements
Section 4(a)(2) of the Securities Act exempts “transactions by an issuer not involving any public oering.” The
term “public oering” is not dened in the Securities Act, and the scope of the Section 4(a)(2) exemption has
largely evolved through case law, SEC pronouncements, and market practice.
The core issue is whether the persons to whom securities are oered need the protection of the Securities Act –
that is, whether they are suciently sophisticated so as to be able to fend for themselves.
12
In determining whether
a transaction is a public oering, relevant factors include the number of oerees and their relationship to each
other and the issuer, the number of securities being oered, the size of the oering, and the manner in which the
oering is conducted.
13
All of the surrounding circumstances must be considered in this analysis.
14
PRACTICE POINT
Section 4(a)(2) is only available for offers and sales by an issuer; resales of securities acquired from an issuer
require a separate exemption (such as Rule 144A). Global IPOs in certain jurisdictions are structured for tax
and regulatory reasons as Section 4(a)(2) sales directly to investors.
Private placements under Section 4(a)(2) typically consist of, among other things:
• a nonpublic oering (that is, an oering without any form of general solicitation or advertising);
• to a limited number of oerees;
• who are buying for investment and not with a view to distribution; and
• who are sophisticated investors and have been provided with or have access to information about the issuer.
15
In addition, the securities issued in a private placement generally include restrictions on resales by the purchasers
(such as through the use of stop-transfer orders, restrictive legends, and the like).
16
10 Latham & Watkins – Global IPO Guide
Regulation D Private Placements
As you can see, it is not possible to map the borders of Section 4(a)(2) with precision. Securities Act Regulation D
helps give some certainty in this area, and it also establishes various safe harbors from Securities Act registration.
Foreign private issuers are most likely to look to Rule 506 of Regulation D, which is not limited to oering amount.
If the conditions of Rule 506 are met, the transaction is deemed not to be a public oering within the meaning of
Section 4(a)(2).
Under Rule 506:
• Accredited Investors and others: There is no limit to the number of accredited investors, or AIs, who may
participate in the transaction, and up to 35 non-AIs may purchase securities. In addition, each non-AI must
demonstrate to the issuer’s reasonable belief that it, “either alone or with his purchaser representative(s)
has such knowledge and experience in nancial and business matters that he is capable of evaluating the
merits and risks of the prospective investment.”
17
Issuers and their placement agents typically satisfy this
requirement by having potential investors complete “investor questionnaires” demonstrating their accredited
status or their sophistication.
• Information requirements:
18
There is no specic information requirement for AIs, although antifraud
considerations of course come into play. By contrast, non-AIs must receive extensive information about the
issuer. If the issuer is not an Exchange Act reporting company, that information includes non-nancial and
nancial information substantially equivalent to what it would have been required to provide in a registration
statement under the Securities Act. The issuer must also make available to each purchaser the opportunity to
ask questions about the oering or the issuer.
PRACTICE POINT
Regulation D also includes a limitation on the use of Rule 506 by “bad actors” – that is, entities that have
run afoul of various US laws. The bad actor requirements have led certain deal teams to prefer to rely on
Section 4(a)(2) rather than Regulation D.
• General solicitation/general advertising only permitted under certain circumstances: “General
solicitation” or “general advertising” may only be used to oer or sell the securities under circumstances
spelled out in Rule 506(c).
• Limitation on resale:
19
Securities acquired in a Regulation D transaction are “restricted securities” that
cannot freely be resold absent registration or an exemption from registration. The issuer must take reasonable
care to make sure that purchasers would not be deemed to be statutory underwriters (that is, engaged in
a distribution of the securities), which is typically satised by requiring purchaser representations about
investment intent, restrictive legends on certicates, and restrictions on transfer.
• Form D:
20
The issuer must le a notice with the SEC on Form D no later than 15 days after the rst sale of
securities. Form D must be led electronically on the SEC’s EDGAR system.
21
Accredited investors include:
22
• certain US nancial institutions such as banks, savings and loan associations, broker-dealers, and the like;
• corporations or partnerships not formed for the specic purpose of acquiring the securities being oered with
assets over $5 million;
• directors, executive ocers, and persons holding similar positions with or in the issuer;
11The Global IPO Business
• natural persons with a net worth (alone or with that person’s spouse) exceeding $1 million, excluding the
value of the primary residence of the investor;
• natural persons with individual income in excess of $200,000 per year or, with that person’s spouse, in excess
of $300,000 per year;
• any entity in which all the equity owners are themselves AIs;
• any entity that owns “investments” within the meaning of Investment Company Act Rule 2a51-1(b) greater
than $5 million, (e.g., Indian tribes, governmental bodies, and foreign entities);
• Limited Liability Companies (LLCs) with total assets in excess of $5 million;
• any natural person holding in good standing a professional certication, designation, or credential that the
SEC has designated by order as qualifying for AI status (e.g., General Securities Representative license
(Series 7), the Private Securities Oerings Representative license (Series 82), and the Investment Adviser
Representative license (Series 65));
• “knowledgeable employees” within the meaning of Investment Company Act Rule 3c-5(a)(4), including
trustees, advisory board members, and employees who participate in the investment activities of a private
fund under Investment Company Act Section 3(c)(1) or Section 3(c)(7);
• Investment advisers (IAs) registered with the SEC under Section 203 of the Advisers Act, state-registered IAs,
and IAs qualifying as an “exempt reporting adviser” under Advisers Act Section 203(m) (advisers to private
funds) or Section 203(l) (advisers to venture funds); and
• certain family oces with greater than $5 million in assets under management, and their family clients.
Restrictions on Communications During the Global IPO Process
As discussed above, directed selling eorts or general solicitation in the United States can destroy the availability
of the exemptions from registration on which global IPOs typically rely. In addition, publicity about a global IPO
can amount to an illegal oer of securities. Accordingly, communications about a planned or pending global IPO
are subject to certain limitations.
In particular, a foreign private issuer may:
• continue to advertise products and services and to issue press releases regarding factual business and
nancial developments in accordance with past practice;
23
• distribute a preliminary and nal oering document to certain investors; and
• conduct certain press activities outside the United States under Securities Act Rule 135e.
Oshore Press Activity – Securities Act Rule 135e
Rule 135e provides a safe harbor from the denition of oer for FPIs, and oshore press activity meeting
Rule 135e does not constitute general solicitation or directed selling eorts.
24
Rule 135e allows an FPI to provide journalists with access to: (1) its press conferences held outside the United
States; (2) meetings with issuer (or selling security holder) representatives conducted outside the United States;
and (3) written press-related materials released outside the United States at or in which the issuer discusses its
intention to undertake an oering. To take advantage of Rule 135e, the oering must not be conducted solely
in the United States – that is, the issuer must have a bona de intent to make an oering oshore concurrently
with the US oering. The issuer must also provide access to both US and non-US journalists, and ensure that
12 Latham & Watkins – Global IPO Guide
any written press releases are distributed to journalists (including US journalists) outside the United States and
contain a specied legend.
PRACTICE POINT
Note that even if Rule 135e is otherwise available, an issuer may not rely on it to provide internet access to its
offshore press conferences or written press-related materials issued offshore, unless it implements procedures
to ensure that only persons physically located outside the US will have access to the press conferences
or materials.
25
Research Reports
The issuance of a research report regarding an issuer or its securities around the time of an unregistered oering
raises the question of whether such a report could be viewed as directed selling eorts and/or general solicitation
in respect of the oering – the presence of which may result in the loss of an available registration exemption.
For this reason (and because of general liability concerns), many broker-dealers will not allow research to be
distributed in the United States in connection with global IPOs.
13
ENDNOTES
1
Securities Act Rule 405; see also Exchange Act Rule 3b-4.
2
Securities Act Rule 901.
3
Securities Act Rule 902(h).
4
Securities Act Rule 902(c)(1).
5
Securities Act Rule 902(c).
6
Final Rule: Oshore Oers and Sales, Release No. 6863, text at FN 64 (Apr. 24, 1990).
7
Id., text at FN 145. See also Final Rule: Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to
Capital in Private Markets Release No. 33-10884 (Nov. 2, 2020), at page 51.
8
Securities Act Rule 902(e). A “foreign issuer” is any foreign government or foreign private issuer.
9
Securities Act Rule 902(j) denes “Substantial US Market Interest.”
10
Securities Act Rule 903(b)(ii) denes what is considered an “overseas directed oering.”
11
Securities Act Rule 144A, Preliminary Note 6.
12
See SEC v. Ralston Purina Co., 346 U.S. 119, 125 (1953) (“the applicability of the [private placement exemption] should turn on whether
the particular class of persons aected needs the protection” of the Securities Act; an oering to those “who are shown to be able to fend
for themselves” is a private placement).
13
See Release No. 33-285, 1935 SEC LEXIS 485 (Jan. 24, 1935).
14
See Release No. 33-4552, 1962 SEC LEXIS 166 (Nov. 6, 1962) (all the surrounding circumstances must be considered “including such
factors as the relationship between the oerees and the issuer, the nature, scope, size, type and manner of the oering”).
15
Certain courts have held that this information must be comparable to the information investors would have received in a public oering.
See, e.g., Doran v. Petroleum Mgmt. Corp., 545 F.2d 893, 903 (5th Cir. 1977).
16
Securities sold under Section 4(a)(2) are restricted securities that may not be freely resold to the public. Securities Act Rule 144(a)(3).
17
Securities Act Rule 506(b)(2)(ii); Securities Act Rule 501(h) denes “purchaser representative.”
18
Securities Act Rule 502(b).
19
Securities Act Rule 502(c).
20
Securities Act Rule 503.
21
Regulation S-T, Rule 101(a)(1)(xiii).
22
Securities Act Rule 501(a).
23
See Guidelines for the Release of Information by Issuers Whose Securities are in Registration, Release No. 33-5180 (Aug.16, 1971).
24
Securities Act Rules 502(c), 902(c)(3)(vii).
25
SEC Guidance: Use of Electronic Media, Release No. 33-7856, FN 68 (Apr. 28, 2000).
The Global IPO Business
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15Global IPO Financial Statements
GLOBAL IPO FINANCIAL STATEMENTS
What Financial Statements Must Be Included?
The starting point for guring out what nancial statements will be contained in the oering document for a global
IPO is determining the nancial statement requirements for an IPO registered with the SEC. We accordingly
discuss below what would be needed in a public IPO in the United States by an FPI. (References below to a
“registration statement” refer to the IPO disclosure document led with the SEC on a prescribed form; “S-K” refers
to the SEC’s rules for textual disclosure under Regulation S-K; and “S-X” refers to the SEC’s rules for nancial
statements under Regulation S-X.)
Foreign private issuers nonetheless tend to take a exible approach to nancial statements in global IPOs
depending on a variety of factors, including local market practice, deal size, underwriter practice, investor
expectations, and other marketing issues. As a result, you and the underwriters may choose to deviate from
the requirements listed below in specic circumstances. In addition, local law might also require you to provide
additional nancial information, cover additional periods, or have interim periods audited.
The Basic Requirements for US Public Oerings
Annual Audited Financial Statements
• Consolidated annual audited financial statements of the issuer consisting of:
1
○ balance sheet;
○ statement of comprehensive income (or a statement of net income if there was no other comprehensive
income);
○ statement of changes in equity;
○ statement of cash flows;
○ related notes and schedules required by the system of accounting under which the financial statements
were prepared; and
○ if not included in the primary financial statements, a note analyzing the changes in each caption of
shareholders’ equity presented in the balance sheet.
• Audited financial statements must cover each of the latest three fiscal years,
2
with certain exceptions:
○ if the issuer has been in existence less than the required three years, financial information covering the
issuer’s predecessor entities (if any) may need to be provided;
3
○ if a jurisdiction outside the United States does not require a balance sheet for the earliest year of the
three-year period, that balance sheet may be omitted;
4
and
○ in an EGC IPO registration statement, as discussed below.
• Under certain circumstances, audited financial statements may cover nine to 12 months rather than a full
fiscal year for one of the required years.
5
• Audited financial statements must be accompanied by an audit report covering each of the audited periods.
6
16 Latham & Watkins – Global IPO Guide
Interim Unaudited Financial Statements
• If a registration statement becomes effective within nine months after the end of the last audited fiscal year,
the issuer must provide consolidated interim financial statements.
7
• Those financial statements:
○ may be unaudited;
8
○ must cover at least the first six months of the fiscal year;
○ should include a balance sheet, statement of comprehensive income, statement of cash flows, statement
of changes in equity, and selected note disclosures;
○ may be in condensed form, as long as they contain the major line items from the latest audited financial
statements and include the major components of assets, liabilities, and equity (in the case of the balance
sheet), income and expenses (in the case of the statement of comprehensive income), and the major
subtotals of cash flows (in the case of the statement of cash flows); and
○ should include comparative interim statements for the same period in the prior fiscal year, except that
the requirement for comparative balance sheet information may be met by presenting the year-end
balance sheet.
9
EGC Offerings
• In order to qualify as an emerging growth company, or EGC, a company must have annual revenue for its
most recently completed fiscal year of less than $1.235 billion.
10
After the initial determination of EGC status,
a company will remain an EGC until the earliest of:
○ the last day of any fiscal year in which the company earns $1.235 billion or more in revenue;
○ the date when the company qualifies as a “large accelerated filer,” with at least $700 million in public
equity float;
11
○ the last day of the fiscal year ending after the fifth anniversary of the IPO pricing date; or
○ the date of issuance, in any three-year period, of more than $1.0 billion in non-convertible debt securities.
• An EGC may conduct its initial public equity offering using two years, rather than three years, of audited
financial statements.
12
The required MD&A would cover only the years for which audited financial statements
are provided.
Acquired Business Financial Information and Pro Forma Financial Information
• Depending on the size of the acquisition and its significance to the issuer (which is measured in various
ways – not all of them intuitive), audited financial statements for the most recent one or two fiscal years of
the acquired business must be included, plus appropriate unaudited interim financial statements. These
requirements are found in S-X Rule 3-05 and S-X Rule -3-14 (which applies to acquisitions of real estate
operations). We discuss S-X Rule 3-05 in more detail below.
• Under S-X Article 11, when acquired business financial statements are included in a registration statement
(and in certain other instances), pro forma financial information must also be included, covering the most
recently completed fiscal year and the most recent interim period. We discuss S-X Article 11 in more
detail in the following page.
17Global IPO Financial Statements
Statement of Capitalization and Indebtedness
• A registration statement must include a statement of capitalization and indebtedness.
13
Although the rules
require the capitalization table to be as of a date no earlier than 60 days prior to the date of the registration
statement,
14
the SEC Staff will not object if a foreign private issuer presents the statement as of the same
date as the most recent balance sheet required in the registration statement.
15
If, however, there have been
or will be significant changes in capitalization (for example, securities issuances including the proposed
IPO), those changes should be reflected in “as adjusted” columns or notes to the table.
16
When Does Financial Information Go “Stale”?
Understanding the timing requirements for the provision of nancial statements is almost as critical as
understanding the scope of the nancial information required. The determination of when nancial statements go
“stale” (i.e., are too old and must be updated) is sure to come up at the all-hands meeting, and planning to have
the necessary nancial information prepared on time is an essential part of the oering process.
The following tables summarize nancial statement staleness requirements, measured by the number of days
between the eective date of the registration statement (or, by analogy, the pricing date of a Rule 144A oering if
the transaction is intended to mirror SEC requirements) and the date of the nancial statements in the ling.
17
For
any of the time frames noted below, if the last day before the nancial statements go stale is a Saturday, Sunday,
or US federal holiday, Securities Act Rule 417 allows the ling to be made on the next business day, thereby
eectively postponing the staleness date.
Staleness of Annual Audited Financial Statements
• In a public IPO by a foreign private issuer, the audited financial statements must be as of a date not older
than 12 months prior to the time the document is filed.
18
In other words, an IPO issuer with a December 31
fiscal year end cannot file a registration statement after January 1 without including audited financial
statements for the year just ended (or audited financial statements as of an interim date less than 12 months
prior to the filing). However, if the issuer is already public in another jurisdiction, the 12-month rule does not
apply.
19
In addition, an issuer may comply with the 15-month rule in an IPO where it is able to represent that
it is not required to comply with this requirement in any other jurisdiction outside the United States and that
complying with the requirement is impracticable or would involve undue hardship.
20
Staleness of Interim Unaudited Financial Statements
• If a registration statement becomes effective more than nine months after the end of the last audited fiscal
year (e.g., September 30, in the case of an issuer with a December 31 fiscal year end) the issuer must
provide unaudited interim financial statements covering at least the first six months of the year.
• In addition, if an issuer publishes interim financial statements that are more current than those required,
it must include the more current information in its registration statement.
21
For example, if an issuer with a
fiscal year ending December 31 publishes first quarter information and does a securities offering in July, it
must include the first quarter information in its registration statement.
MD&A
Registration statements for foreign private issuers must contain or incorporate by reference an “Operating and
Financial Review and Prospects,” which contains essentially the same information as the MD&A (so we will refer
to this as the MD&A).
22
18 Latham & Watkins – Global IPO Guide
The purpose of the MD&A is to provide investors with management’s explanation of factors that have materially
aected the issuer’s historical nancial condition and results of operations, and an assessment of known trends
and uncertainties that management anticipates will have a material eect in the future. A well-written MD&A will
allow investors to view the issuer from management’s perspective. It will identify and discuss the key metrics and
any other statistical data that management uses to evaluate the business’ performance and nancial health, or
that management believes will enhance an investor’s understanding of its nancial condition, cash ows, and
results of operations. The analysis should cover all separate segments and other subdivisions, such as product
lines and geographic regions of the issuer. An FPI should also refer to the reconciliation to US GAAP and discuss
any aspects of US GAAP not covered in the reconciliation that it believes are necessary to understanding the
nancial statements as a whole.
23
The MD&A line-item requirements cover the following topics:
Operating results. A discussion of signicant factors materially aecting the issuers’ income from operations,
including material changes in net sales or revenue and reason for the changes (such as new products or services,
or changes in prices or amounts); foreign currency uctuations; the impact of hyperination, if any, during the
period; and governmental policies.
24
Liquidity and capital resources. A comprehensive discussion of the issuer’s ability to generate and obtain
adequate amounts of cash to meet its requirements and its plans for cash in both the next 12 months and a
separate discussion of its long-term needs.
25
Research and development, patents, and licenses, etc. A description of the issuer’s research and
development policies for the last three years.
26
Trend information. The issuer must identify known trends, uncertainties, demands, commitments, or events that
are reasonably likely to have a material eect on its net sales or revenues, income from continuing operations,
protability, liquidity or capital resources, or that would cause reported nancial information not necessarily to be
indicative of future operating results or nancial condition.
27
Critical accounting estimates. Issuers that do not prepare nancial statements in accordance with IFRS IASB
must provide information about accounting estimates or assumptions that are uncertain and reasonably likely
to have a material impact on nancial condition or operating performance.
28
The discussion should include
qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the
critical accounting estimate has had or is reasonably likely to have to the extent the information is material and
reasonably available.
29
In addition, MD&A sections often incorporate a comprehensive analysis of the issuer’s future prospects, typically
presented under a subheading such as “Outlook.” Some issuers provide specic guidance for the upcoming
quarters or the current/following scal year. Drafting the MD&A section requires close cooperation among the
issuer’s nancial team, its accountants, and legal counsel and can be a time-consuming process.
The SEC has published several interpretive releases with guidance on preparing the MD&A, most recently in
2020, when it streamlined the rules and moved toward a more principles-based approach.
30
Recent and Probable Acquisitions
In addition to nancial statements of the issuer, registration statements generally require inclusion of audited
nancial statements for a signicant acquisition of a “business” that has taken place 75 days or more before
the oering. In the case of an acquisition that exceeds 50% on any of the signicance tests discussed below,
the audited nancial statements must be included as soon as the acquisition becomes “probable.”
31
These
requirements can be found in S-X Rule 3-05. In addition, where a material acquisition has occurred or is probable,
pro forma nancial information complying with S-X Article 11 for the most recent scal year and the most recent
interim period will generally also be required in the registration statement.
19Global IPO Financial Statements
What Is a “Business”?
The SEC denes the term “business” to include an operating entity or business unit, but excludes machinery
and other assets that do not generate a distinct prot or loss stream.
32
It is important to note that the denition
of a business under US GAAP (and potentially other GAAPs) diers from the SEC’s denition. Accordingly, an
acquisition that is a business under US GAAP may not be one for SEC purposes, and vice versa.
What Is “Probable”?
Evaluating whether a given transaction is probable involves looking at the facts and circumstances. The SEC
Sta has taken the general view that an acquisition becomes probable at least upon the signing of a letter of
intent,
33
and has also stated that an acquisition is probable “where registrant’s nancial statements alone would
not provide adequate nancial information to make an investment decision.”
34
In practice, unless there were
signicant conditions relating to a proposed acquisition, an issuer would not want to be in the position of arguing
and disclosing that an important acquisition is not probable.
Signicance Tests
Whether nancial statements for recent and probable acquisitions must be included in the ling also depends
upon the “signicance” of the acquisition. Signicance of an acquired business is evaluated under S-X Rule 3-05
based upon three tests (which in turn are derived from S-X Rule 1-02(w)):
• Investment Test – the amount of the issuer’s investment in the acquired business (generally, the aggregate
value of the acquisition) compared to:
− the aggregate worldwide market value of the issuer’s voting and non-voting common equity, or
− the issuer’s total assets if it does not have publicly traded equity securities.
35
• Asset Test – the issuer’s share of the consolidated total assets of the acquired business compared to the
issuer’s consolidated total assets, in each case after intercompany eliminations.
36
• Income Test – includes two components, both of which must be tested where applicable:
− Net income component – the issuer’s share of “pre-tax income”
37
from continuing operations of the
acquired business compared to the issuer’s pre-tax income from continuing operations.
38
− Revenue component – where the issuer and the acquired business have material annual revenue for the
last two scal years, the issuer’s (and its other subsidiaries’) share of the consolidated total revenues of
the acquired business compared to the issuer’s consolidated total revenues for its most recent scal year,
in each case after intercompany eliminations.
39
− Note: When testing signicance, both components of the test must exceed the applicable threshold.
When determining the number of periods for which nancial statements must be presented, the issuer
uses the lower of the two components.
40
Each of these tests should compare the issuer’s and the acquired business’ most recent annual nancial
statements (which need only be audited for the issuer).
41
Worldwide market value should be determined using the
average of the last ve trading days of the month before the acquisition was agreed or announced (whichever is
earlier).
42
In addition, any issuer – including an IPO issuer – may use pro forma nancial information to measure
ignicance for acquisitions consummated in the most recent scal year, so long as it has led the required S-X
Rule 3-05 nancial statements and S-X Article 11 pro forma nancial information for the acquired businesses.
43
(In the case of an IPO issuer, the relevant disclosure would be made in its IPO registration statement.) Once
an issuer uses pro forma nancial information to measure signicance, it will need to continue to use pro forma
nancials until the next Form 20-F annual report.
44
This approach can be useful where the pro forma information
produces a larger “denominator” for testing signicance.
20 Latham & Watkins – Global IPO Guide
Acquisitions of related businesses are treated as a single acquisition for purposes of the signicance tests.
Businesses are considered “related” if they are owned by a common seller or under common management, or
where the acquisition of one business is conditioned upon the acquisition of each other business or a single
common event.
45
Generally:
• If the acquired business exceeds 20% of any of the three signicance tests, then one year of audited nancial
statements is required, as well as the most recently completed interim period that would be required under
S-X Rules 3-01 and 3-02;
46
• If the acquired business exceeds 40%, of any of the three tests, then two years of audited nancial
statements and the appropriate interim periods are required.
47
Financial Statements Required in Connection With Acquisitions
The following table summarizes the general rules for an acquisition that occurred more than 75 days before the
oering. The issuer must, when both the net income and revenue components of the Income Test are applicable,
use the lower of the two to determine the number of periods required.
48
Acquisition Scenario Reporting Requirement
• Individual acquisition at or below the 20%
significance level.
• No requirement to include audited or interim financial
statements.
• Individual acquisition (or multiple acquisitions
of “related businesses,” as described above) in
excess of the 20% significance level, but not
above the 40% level.
• Audited financial statements for the most recent fiscal
year of the acquired business must be included.
Unaudited interim financial statements for the most
recently completed interim period may need to be
included, depending on the time of year that the
offering takes place.
• Individual acquisition (or multiple acquisitions
of “related businesses,” as described above) in
excess of the 40% significance level.
• Audited financial statements for the two most recent
fiscal years of the acquired business must be
included. Unaudited interim financial statements may
need to be included, depending on the time of year
that the offering takes place.
Multiple acquisitions of unrelated businesses
aggregating more than 50% significance that are:
• less than 20% significance level
• greater than 20% and less than 50% significance
level and:
○ have not yet been consummated or
○ have been consummated but for which
financial statements are not yet required
because of the 75-day grace period
49
• Audited financial statements for the most recent fiscal
year will be required for any acquired business that
exceeds the 20% significance level and for the most
recent two fiscal years for any business that exceeds
the 40% significance level. The unaudited interim
financial statements that are required for individual
acquisitions may need to be included, depending on
the time of year that the offering takes place.
Note that:
• The permitted age of nancial statements of an acquired or soon-to-be-acquired business is generally
determined by looking to the “staleness” rules that apply to its nancial statements (rather than the staleness
rules applicable to the nancial statements of the acquiring company).
50
In other words, you need to determine
21Global IPO Financial Statements
whether the acquired company is, for example, a large accelerated ler, an accelerated ler, or an initial ler,
and then analyze the dates on which its nancial statements go stale.
51
• Below the 50% signicance level, no audited nancial statements are required in the oering document
for probable acquisitions or for completed acquisitions consummated up to 74 days before the date of the
oering.
52
The commitment committees of some nancing sources may, however, require at least a one-year
audit of the acquired company in this situation together with historical pro forma nancial information, even if
the 74-day grace period has not yet expired.
Exceptions to the Financial Statement Requirements for Acquired Businesses
There are a number of exceptions to the requirement to provide separate nancial statements of
acquired businesses.
• Separate nancial statements for an acquired business do not need to be presented once the operating
results of the acquired business have been included in the issuer’s audited consolidated nancial statements
for at least nine months for an acquired business that exceeds the 20% level of signicance and one scal
year for an acquired business that exceeds the 40% level.
53
• A single audited period of nine, 10, or 11 months may count as a year for an acquired business in certain
circumstances.
54
MD&A for Acquisitions
Whenever historical nancial statements of an acquired business (or probable acquisition) are included in the
oering document, the issuer will need to consider whether a separate MD&A section discussing those nancial
statements is appropriate. Although there is no specic line item requiring that a second MD&A be included, it
is not uncommon for issuers to interpret Securities Act Rule 408
55
to require a full discussion and analysis of the
nancial statements of an acquired business (or probable acquisition), particularly where it is necessary to make
the required statements not misleading.
Pro Forma Financial Information
As noted above, where a material acquisition has occurred, or is probable, that would trigger the need for acquired
business nancial statements under S-X Rule 3-05, pro forma nancial information complying with S-X Article
11 must also be included. Pro forma nancial information will also be required for multiple acquisitions that in the
aggregate exceed the 50% level of signicance of (i) individually insignicant businesses (i.e., below the 20%
signicance level), and (ii) acquisitions of individually signicant businesses between the 20% and 50% signicance
level that have either not have been consummated or for which nancial statements are not yet required due to the
75-day grace period.
56
Pro forma nancial information is intended to illustrate the continuing impact of a transaction
by showing how the specic transaction might have aected historical nancial statements had it occurred at the
beginning of the issuer’s most recently completed scal year or the earliest period presented.
In particular, S-X Article 11 requires:
57
• a pro forma condensed balance sheet
58
as of the end of the most recent period for which a consolidated
balance sheet of the issuer is required, unless the transaction is already reected in that balance sheet;
59
and
• a pro forma condensed statement of comprehensive income
60
for the issuer’s most recently completed scal
year and the most recent interim period, unless the historical statement of comprehensive income reects the
transaction for the entire period.
61
S-X Article 11 provides extensive specic requirements for the content of pro forma nancial information, including
those set out in the following table.
62
22 Latham & Watkins – Global IPO Guide
Pro Forma Financial Information – Key Content Requirements – S-X Rule 11-02
Required Adjustments
Transaction Accounting Adjustments – reflect the application of US GAAP or IASB IFRS to the transaction,
linking the effects of the acquired business to the issuer’s audited historical financial statements and must
include:
• Total consideration transferred or received, including its components and how they were measured.
• If any consideration is contingent, the basis for determining the amount(s) and an undiscounted estimate of
the range of outcomes or an explanation of why a range cannot be estimated.
• If the initial accounting is incomplete, a prominent statement to that effect, and a description of the required
information, including uncertainties affecting the pro forma financial information, an estimate of when the
accounting will be finalized, and other information regarding the magnitude of the potential adjustments.
Autonomous Entity Adjustments – reflect the operations and financial position of the acquiror (i.e., the
issuer) as an autonomous entity when it was previously part of another entity and must include:
• A description of each adjustment and any material uncertainties, the calculation of the adjustment, and
qualitative information about the adjustment necessary to give a fair and balanced presentation.
Transaction Accounting and Autonomous Entity Adjustments – must be included in the calculation of
the historical and pro forma per share data presented on the face of the pro forma condensed statement of
comprehensive income.
Pro Forma Financial Information – must include revenues, expenses, gains and losses, and related tax
effects that will not recur in the income of the issuer beyond 12 months after the transaction.
Optional Adjustments
Management’s Adjustments – permit the issuer to include forward-looking information
63
that depicts the
synergies and dis-synergies identified by management and provides insight to investors into the potential
effects of the acquisition and management’s post-acquisition plans.
The following conditions must be met:
• There is a reasonable basis for each such adjustment;
• Adjustments that reduce expenses may not exceed the amount of the related expense historically incurred
during the pro forma period presented;
• The pro forma financial information includes a statement that, in the opinion of management, it reflects all
Management’s Adjustments necessary to a fair statement of the pro forma financial information presented;
and
• When synergies are presented, any related dis-synergies must also be presented.
23Global IPO Financial Statements
Pro Forma Financial Information – Certain Key Content Requirements – S-X Rule 11-02
• Additional Form of Presentation requirements include:
○ The explanatory notes must include disclosure of the basis for and material limitations of each
Management’s Adjustment, including any material assumptions or uncertainties of such adjustment, an
explanation of the method of the calculation of the adjustment, if material, and the estimated period for
achieving the synergies and dis-synergies of such adjustment.
○ Management’s Adjustments must be presented in the explanatory notes in the form of reconciliations of
pro forma net income from continuing operations attributable to the controlling interest and the related pro
forma earnings per share data to such amounts after giving effect to the adjustments.
○ Management’s Adjustments included (or incorporated by reference) should be as of the most recent
practicable date prior to the applicable effective date, mail date, qualified date, or filing date.
If Management’s Adjustments will change the number of shares or potential common shares, the change must
be reflected within Management’s Adjustments in accordance with US GAAP or IASB IFRS, as applicable, as if
the shares were outstanding as of the beginning of the period presented.
Periods to Be Presented
Pro forma condensed statements of comprehensive income should be presented using the issuer’s fiscal year
end.
64
If the most recent fiscal year end of the acquired company differs from that of the issuer by more than 93
days, the acquired company’s fiscal year end should be brought up to within 93 days of the issuer’s fiscal year
end (if practicable).
65
Industry Guides
S-K Item 801 sets out three industry “guides” requiring enhanced disclosure of nancial and operational metrics
for issuers in certain industries:
66
• Guide 4 – Prospectuses Relating to Interests in Oil and Gas Programs: requires enhanced disclosure
relating to the oering terms and participation in costs and revenues among investors and others, as well as
a 10-year nancial summary of any drilling programs by the issuer and its associates, including recovery on
investment for investors in those programs.
• Guide 5 – Preparation of Registration Statements Relating to Interests in Real Estate Limited
Partnerships: requires a summary of the nancial performance of any other real estate investment programs
sponsored by the general partner and its aliates.
• Guide 6 – Disclosure Concerning Unpaid Claims and Claim Adjustment Expenses of
Property-Casualty Insurance Underwriters: requires disclosure of details of reserves and historical
claim data if reserves for unpaid property-casualty claims and claim adjustment expenses of the issuer, its
consolidated and unconsolidated subsidiaries and equity investees exceed 50% of the common stockholders’
equity of the issuer and its consolidated subsidiaries.
In recent years, the SEC has rescinded the following industry guides and moved the disclosure requirements into
subparts of S-K.
S-K Item 1200 (formerly Guide 2) requires enhanced disclosure of oil and gas reserves (including from non-
traditional sources), the company’s progress in converting proved undeveloped reserves into proved developed
reserves, technologies used in establishing reserves, the company’s internal controls over reserves estimates,
and disclosure based on geographic area (as dened). Required disclosure also includes information regarding
proved undeveloped reserves; oil and gas production; drilling and other exploratory and development activities;
24 Latham & Watkins – Global IPO Guide
present activities; delivery commitments; and oil and gas properties, wells, operations, and acreage. Disclosure of
probable and possible reserves and oil and gas reserves’ sensitivity to price is optional under S-K Item 1200.
67
S-K Item 1300 (formerly Guide 7) requires disclosure of mineral resources and reserves that have been
determined on the company’s properties. The company must provide summary disclosure about its properties
in the aggregate along with detailed disclosure about individually material properties, including location of the
property, history of previous operations, and a description of the present condition of and operations on the
property. The company must also disclose material exploration results and related exploration activity and
exploration targets, if the disclosure is accompanied by specied cautionary and explanatory statements. The
disclosure must be based on and accurately reect information and supporting documentation prepared by a
mining expert — or “qualied person,”
68
including a dated and signed technical report summary, which identies
and summarizes the information reviewed and conclusions reached about the mineral resources or mineral
reserves determined to be on each material property. The technical report summary must be led as an exhibit
when disclosing mineral reserves or mineral resources for the rst time or when there is a material change in the
mineral reserves or mineral resources from the last technical report summary led for the property.
69
S-K Item 1400 (formerly Guide 3) requires disclosure by bank holding companies about the following for
each annual period presented and any additional interim period if a material change in the information or trend
evidenced thereby has occurred: distribution of assets, liabilities and stockholders’ equity, the related interest
income and expense, and interest rates and interest dierential; weighted average yield of investments in debt
securities by maturity; maturity analysis of the loan portfolio including the amounts that have predetermined
interest rates and oating or adjustable interest rates; certain credit ratios and the factors that explain material
changes in the ratios, or the related components during the periods presented; the allowance for credit losses by
loan category; and bank deposits including average amounts and rate paid and amounts that are uninsured.
70
PRACTICE POINT
Compiling the information required by these industry guides and S-K Items may be a significant undertaking,
and the issuer’s financial and operating management should consult with its professional advisors early in the
process if an industry guide applies to the offering.
Additional Financial Information That Is Typically Included
In addition to the formal requirements of Form 20-F and S-X, it is customary to include additional operational
and other metrics in the oering document to help investors understand the issuer’s business. The three most
common examples are described below.
Other Financial Data
A page of summary nancial data is always included in the “summary box” in the oering document. This key
marketing page often supplements the nancial information with additional operational and other metrics. These
additional metrics will vary with the type of issuer and its industry, and will be selected based on the criteria that
management and the investment community monitor to evaluate performance or liquidity. Typical examples
include comparable store sales data for a retailer, capital expenditures for a manufacturer, and subscriber
numbers for a cable television company.
Recent Financial Results
If a signicant amount of time has passed since the most recent nancial statements included in the oering
document, it may be appropriate to include a summary of recent nancial results in the summary box. Examples of
“recent results” disclosures are most common after a quarter or half year (depending on how frequently the issuer
reports) is completed but before nancial statements concerning that quarter/half year have become available.
The issuer and the underwriters will want to tell investors as soon as possible about any positive improvement in
25Global IPO Financial Statements
operating trends, while if the recent results are negative, recent results disclosure may be advisable to avoid any
negative surprises for investors when the full quarterly/half yearly numbers become available.
Recent Developments
To the extent material, the likely consequences of material recent developments may also be disclosed in the
“summary box” or the MD&A. For example, it is customary to discuss a material recent or pending and probable
acquisition in the MD&A section of the oering document, whether or not audited nancial statements of the acquired
or to-be-acquired business are required to be presented. This practice will often result in a discussion of the impact
of the pending or recently completed transaction on margins, debt levels, etc., in a section of the MD&A labeled
“Overview,” “Impact of the Acquisition,” or a similar title. The textual disclosure may also include a discussion of any
special charges or anticipated synergies expected to result from the acquisition or other pending event.
26 Latham & Watkins – Global IPO Guide
ENDNOTES
1
See Form 20-F, Item 8.A.1.
2
See Form 20-F, Item 8.A.2.
3
See Form 20-F, Instruction 1 to Item 8. See also S-X Rule 3-02(a) (noting if the issuer has been in existence less than the prescribed
number of years, it is sucient to provide statements of comprehensive income for the life of the issuer and its predecessors); Financial
Reporting Manual, Section 6220.5 (a foreign private issuer that has been in existence less than a year must include an audited balance
sheet that is not more than nine months old; if the issuer has commenced operations, it must include audited statements of income,
stockholders’ equity and cash ows for the period from the date of inception to the date of the audited balance sheet). Financial information
of a registrant’s predecessor is required for all periods prior to the registrant’s existence, with no lapse in audited periods or omission of
other information required about the registrant. Financial Reporting Manual, Section 1170. The term predecessor is dened broadly. See
Securities Act Rule 405.
4
See Form 20-F, Instruction 1 to Item 8.A.2.
5
See S-X Rule 3-06. Under this rule, the SEC will accept nancial statements for periods of not less than nine, 21 and 33 consecutive
months as substantial compliance with the requirement to provide nancial statements for one, two and three years, respectively. In
particular, whenever audited nancial statements are required for a period of one, two or three years, a single audited period of nine to
12 months may count as a year if:
• the issuer has changed its scal year during the period;
• the issuer has made a signicant business acquisition for which nancial statements are required under S-X Rule 3-05 and the nancial
statements covering the interim period pertain to the business being acquired; or
• the SEC grants permission to do so under S-X Rule 3-13, provided that nancial statements are led that cover the full scal year or
years for all other years in the time period.
See id. Note that historically the SEC Sta has been reluctant to grant this relief. See Financial Reporting Manual, Note to Section 1140.8
(issuer must show unusual circumstances). More recently, however, the SEC Sta has signaled that it might be willing to grant permission
if an issuer is able to argue that the information is not necessary for investor protection. See Sta of the Division of Corporation Finance,
Draft Registration Statement Procedures Expanded (June 29, 2017, updated Aug. 17, 2017):
While an issuer should take all steps to ensure that a draft registration statement is substantially complete when
submitted, we will not delay processing if an issuer reasonably believes omitted nancial information will not be
required at the time the registration statement is publicly led. In addition, we will consider an issuer’s specic
facts and circumstances in connection with any request made under Rule 3-13 of Regulation S-X.
6
See Form 20-F, Item 8.A.1, Item 8.A.3.
7
See Form 20-F, Item 8.A.5.
8
See Form 20-F at Items 17(c), 18; see also Final Rule: First-time Application of International Financial Reporting Standards, Release
No. 8567 (Apr. 12, 2005) [First-time Application of IFRS Release] (discussing the applicable exceptions).
9
See generally Form 20-F, Item 8.A.5.
10
See JOBS Act Sections 101(a) and (b) (adding new Securities Act Section 2(a)(19) and Exchange Act Section 3(a)(80)).
11
See S-K Items 308 (a) and (b). Under Exchange Act Rule 12b-2, a “large accelerated ler” is an issuer that, as of the end of its scal year:
• has an aggregate worldwide market value of voting and non-voting common equity held by non-aliates (market capitalization) of
$700 million or more (measured as of the last business day of the issuer’s most recently completed second scal quarter);
• has been subject to SEC reporting under the Exchange Act for a period of at least 12 calendar months;
• has led at least one annual report under the Exchange Act with the SEC; and
• is not eligible to be a “smaller reporting company” and had annual revenues of less than $100 million in the most recent scal year for
which nancial statements are available.
In addition, under Exchange Act Rule 12b-2, an “accelerated ler” is an issuer meeting the same conditions, except that it has a market
capitalization of $75 million or more but less than $700 million (measured as of the last business day of its most recently completed second
scal quarter). See Final Rule: Accelerated Filer and Large Accelerated Filer Denitions, Release No. 34-88365 (Mar. 12, 2020). See also
Final Rule: Smaller Reporting Company Denition, Release No. 33-10513 (July 10, 2018).
12
See JOBS Act Section 102(b)(1) (adding new Securities Act Section 7(a)(2)).
13
See Form 20-F, Item 3.B.
14
See id.
15
SEC Division of Corporation Finance, International Reporting and Disclosure Issues, Section III.B.f (Nov. 1, 2004).
16
See id.
17
See Form 20-F, Instruction 1 to Item 8.A.4. The rules regarding the age or “staleness” of the required nancial statements for foreign
private issuers vary a great deal from those applicable to US domestic issuers. Generally speaking, the nancial statements for US
domestic issuers go “stale” at a much faster rate.
27
18
See Form 20-F, Item 8.A.4. (requiring IPO issuers to provide audited nancial statements “as of a date not older than 12 months at the time
the document is led” and noting that the audited nancial statements in such cases “may cover a period of less than a full year”).
19
See Financial Reporting Manual, Section 6220.3.
20
See Form 20-F, Instruction 2 to Item 8.A.4; see Financial Reporting Manual, Section 6220.3.
21
See Form 20-F, Item 8.A.5. This requirement applies to any publication of nancial information that includes, at a minimum, revenue and
income information, even if that information is not published as part of a complete set of nancial statements. See Form 20-F, Instruction 3
to Item 8.A.5.
22
See Form 20-F, Item 5. The MD&A requirements for US issuers are set out in S-K Item 303.
23
See Instruction 10 to S-K Item 303(b).
24
See Form 20-F, Item 5.A. See also, Instruction 9 to S-K Item 303(b).
25
See Form 20-F, Item 5.B.
26
See Form 20-F, Item 5.C.
27
See Form 20-F, Item 5.D.
28
See Form 20-F, Instruction 5 to Item 5 (“In responding to this Item 5, an issuer need not repeat information contained in nancial
statements that comply with IFRS as issued by the IASB.”). See also Final Rule: Management’s Discussion and Analysis, Selected
Financial Data, and Supplementary Financial Information, Release No. 33-10890 (Nov. 19, 2020), at n.243 (“These proposed [critical
accounting estimate] requirements are similar to those found in IFRS.”); n.344 (“Certain IFRS standards require some disclosures that
substantially overlap with the requirements of Item 5.E. [Critical Accounting Estimates] of Form 20-F.”)
29
See Form 20-F, Item 5.E.
30
See Final Rule: Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, Release
No. 33-10890 (Nov. 19, 2020); Commission Guidance on Management’s Discussion and Analysis of Financial Condition and Results
of Operations, Release No. 33-10751(Jan. 30, 2020); Commission Guidance on Presentation of Liquidity and Capital Resources
Disclosures in Management’s Discussion and Analysis, Release No. 33-9144 (Sept. 17, 2010); Interpretation: Commission Guidance
Regarding Management's Discussion and Analysis of Financial Condition and Results of Operations, Release No. 33-8350 (Dec. 19,
2003); Commission Statement about Management's Discussion and Analysis of Financial Condition and Results of Operations, Release
No. 33-8056 (Jan. 22, 2002); and SEC Interpretation: Management's Discussion and Analysis of Financial Condition and Results of
Operations; Certain Investment Company Disclosures, Release No. 33-6835 (May 18, 1989).
31
See Form F-1, Item 4(b); see also Form F-3, Item 5(b)(1)(i).
32
See S-X Rule 11-01(d). The question whether an acquisition is of a “business” should be evaluated in light of the facts and circumstances
involved and whether there is sucient continuity of the acquired entity’s operations prior to and after the transactions so that disclosure of
prior nancial information is material to an understanding of future operations. A presumption exists that a separate entity, a subsidiary, or
a division is a business. However, a lesser component of an entity may also constitute a business. Among the facts and circumstances to
consider in evaluating whether an acquisition of a lesser component of an entity constitutes a business are:
• whether the nature of the revenue-producing activity of the component will remain generally the same as before the transaction; or
• whether any of the following attributes remain with the component after the transaction: (i) physical facilities, (ii) employee base,
(iii) market distribution system, (iv) sales force, (v) customer base, (vi) operating rights, (vii) production techniques, or (viii) trade names.
See id.
33
However, a dierent conclusion may be reached depending upon the customary practice for an industry or a particular issuer. For example,
an issuer may be submitting a letter of intent as one of many parties in a bidding process, or a roll-up entity may routinely sign letters of
intent to further its due diligence investigations of multiple potential targets, but with the acquisition of only a minority of those companies
becoming probable.
34
See Financial Reporting Manual, Section 2005.4.
35
S-X Rule 1-02(w)(1)(i)(A).
36
S-X Rule 1-02(w)(1)(ii).
37
By “pre-tax income” we mean the income from continuing operations. See S-X Rule 1-02(w)(1)(iii)(A)(1). Absolute values should be used
for the net income component.
38
S-X Rule 1-02(w)(1)(iii)(A)(1).
39
S-X Rule 1-02(w)(1)(iii)(A)(2).
40
See S-X Rule 3-05(b)(2).
41
S-X Rule 1-02(w)(1).
42
S-X Rule 1-02(w)(1)(i)(A)(3).
43
See S-X Rule 3-05(b)(3) referring to Rule 11-01(b)(3) and (4). The tests may not be made by “annualizing” data, and may only include
Transaction Accounting Adjustments.
44
See S-X Rule 3-05(b)(3) referring to Rule 11-01(b)(3) and (4).
Global IPO Financial Statements
28 Latham & Watkins – Global IPO Guide
45
See S-X Rule 3-05(a)(3) (governing whether businesses are “related”); Rule 11-01(d) (governing whether an acquisition involves a
“business”).
46
See S-X Rule 3-05(b)(2)(ii). A comparative interim period for the prior year is not required when only one year of audited Rule 3-05
Financial Statements is required.
47
See S-X Rule 3-05(b)(2)(iii).
48
See S-X Rule 3-05(b)(2).
49
See S-X Rule 3-05(b)(2)(iv). See also Final Rule: Amendments to Financial Disclosures About Acquired and Disposed Businesses,
Release No. 33-10786 (May 20, 2020), p.79. “Individually insignicant businesses” include any: (a) acquisition consummated after the
acquiror’s audited balance sheet date whose signicance does not exceed 20%; (b) probable acquisition whose signicance does not
exceed 50%; and (c) consummated acquisition whose signicance exceeds 20%, but does not exceed 50%, for which nancial statements
are not yet required because of the 75-day grace period.
50
See S-X Rule 3-05(a)(1) (nancial statements of acquired businesses must be prepared and audited in accordance with S-X).
51
Although the staleness date for an acquired company’s nancial statements is determined based on the status of the acquired company
(e.g., as an accelerated or non-accelerated ler), an interesting wrinkle may emerge where the acquiring company is on a faster track
than the acquired company. In that fact pattern, the separate requirement to include pro forma nancial information under S-X Article 11
can eectively accelerate the need for the acquired company’s nancial information. The acquiring company will need to produce nancial
statements for the acquired business if the acquiring company wants to go to market with “last twelve months” pro forma nancials after the
date on which its own year-end nancials are due but before the due date for the acquired company’s nancials.
52
See S-X Rule 3-05(b)(4)(i). The date of an oering will be deemed to be the date of the nal prospectus or prospectus supplement led
pursuant to Rule 424(b). See id. By analogy, the pricing date would be the date of an oering in a Rule 144A transaction.
53
S-X Rule 3-05(b)(4)(iii).
54
See S-X Rule 3-06.
55
Securities Act Rule 408 states that, “In addition to the information expressly required to be included in a registration statement, there shall
be added such further material information, if any, as may be necessary to make the required statements, in the light of the circumstances
under which they are made, not misleading.”
56
See S-X Rule 3-05(b)(iv)(A) and S-X Rule 3-14(b)(2)(i)(C)(1).
57
See S-X Rule 11-01(a)(1) (noting pro forma nancial information required for a “signicant” business acquisition); S-X Rule 11-01(b)(1)
(noting a “signicant” acquisition means an acquisition above the 20% signicance level); S-X Rule 11-01(c) (noting no pro forma nancial
information is needed if separate nancial statements of the acquired business are not included and the aggregate impact of the acquisition
of these multiple businesses does not exceed the 50% signicance level).
58
See S-X Rule 11-02(a)(1).
59
See S-X Rule 11-02(c)(1). The pro forma condensed balance sheet should be prepared as if the transaction had occurred on the date of
the latest historical balance sheet.
60
See S-X Rule 11-02(a)(1).
61
See S-X Rule 11-02(c)(2)(i). The pro forma condensed statements of comprehensive income should be prepared as if the transaction had
taken place at the beginning of the latest scal year included in the ling.
62
See generally S-X Rule 11-02.
63
This information is expressly protected by the safe harbor provisions for forward-looking information of Rule 175 under the Securities
Act and Rule 3b-6 under the Exchange Act. See Acquired Business Financial Disclosures Release, p. 115. See also, S-X Rule 11-01
Instruction to paragraph (a)(7).
64
See S-X Rule 11-02(c)(3).
65
See id. This updating could be accomplished by adding subsequent interim period results to the most recent scal year-end information
and deducting the comparable preceding year interim period results. See id. Another common approach is to use the acquired company’s
most recent quarterly information.
66
See generally S-K Item 801.
67
See Interpretive Release: Modernization of Oil and Gas Reporting, Release No. 33-8995 (Dec. 31, 2008).
68
The rules dene a “qualied person” to mean:
• a mineral industry professional with at least ve years of relevant experience in the type of mineralization and type of deposit under
consideration and in the specic type of activity that person is undertaking on behalf of the company; and
• an eligible member or licensee in good standing of a recognized professional organization at the time the technical report is prepared.
69
See Final Rule: Modernization of Property Disclosures for Mining Registrants, Release No. 33-10570 (Oct. 31, 2018).
70
See Final Rule: Update of Statistical Disclosures for Bank and Savings and Loan Registrants, Release No. 33-10835 (Sept. 11, 2020).
29
LIABILITY UNDER THE US FEDERAL SECURITIES LAWS
FOR GLOBAL IPOS
Foreign private issuers who access the US capital markets are exposed to liability under the federal securities
laws in a variety of ways. This liability can be civil or, in certain circumstances, criminal. Although litigation by
private plaintis is more common, the SEC frequently initiates civil enforcement actions against issuers and
persons associated with them. In cases involving serious securities fraud, the US Department of Justice (DOJ)
sometimes brings criminal proceedings, often in parallel with an SEC civil action.
We summarize below the key areas of federal securities law liability relevant to global IPOs.
Registration – Section 5 of the Securities Act
Section 5 of the Securities Act eectively requires every oer and sale of securities to be either registered with the
SEC or made pursuant to an available exemption from registration. The terms “oer” and “sale” in the Securities
Act are broadly construed. For example, an oer includes any attempt to dispose of a security for value.
1
As
a result, publicity in the United States about an impending oering, website disclosure of the oering, or even
an email communication to “friends and family” announcing an oering can constitute an unregistered oer in
violation of Section 5.
Violations of Section 5 can give rise to liability in SEC enforcement actions and also in actions brought by
investors under Section 12(a)(1) of the Securities Act, as discussed below. They can also lead to the delay (or
even abandonment) of a securities oering if the SEC imposes a cooling-o period. As a result of these onerous
remedies, it is critical to control publicity and comply carefully with the requirements for any applicable exemptions
from Section 5 registration.
Under Section 12(a)(1), an investor who buys securities issued in transactions violating Section 5 can rescind
the sale and recover his or her purchase price (plus interest, less any amount received on the securities). If
the investor no longer owns the securities, he or she can recover damages equal to the dierence between the
purchase and the sale price of the securities (again, plus interest, less any amount received on the securities).
2
Section 12(a)(1) imposes strict liability, and an investor is not required to demonstrate any causal link between
his or her damages and the violation of Section 5.
3
However, in order to be liable, a defendant must be a seller –
that is, a person who successfully solicits the purchase, motivated at least in part by nancial interest – and the
plainti must actually have bought the securities from that defendant.
4
Antifraud
As a general matter, there is no duty under the US federal securities laws to disclose material information
unless an applicable rule or regulation specically requires disclosure.
5
An issuer’s duty to disclose may arise in
situations such as purchasing or selling securities.
Once an issuer chooses to disclose information to investors or the public, it must do so completely and
accurately.
6
If a statement is believed by the issuer to be true when made, but the issuer subsequently learns that
it was not true, the issuer generally has a duty to correct that statement.
7
If, on the other hand, a statement by
an issuer was reasonable when made but it becomes misleading in light of subsequent events, the issuer might
or might not have a “duty to update” the statement, depending on a number of factors.
8
This is one reason why
projections of future results require careful thought.
What Is “Material”?
The various antifraud provisions of the Securities Act and the Exchange Act impose liability for material
misstatements or omissions in the oer or sale, or in connection with the purchase or sale, of securities. The
fundamental test for “materiality” is whether there is a substantial likelihood that a reasonable investor would
consider the misstatement or omission important in deciding whether or not to purchase or sell a security.
9
As the
US Supreme Court has explained, “there must be a substantial likelihood that the disclosure of the omitted fact
Liability Under the US Federal Securities Laws for Global IPOs
30 Latham & Watkins – Global IPO Guide
would have been viewed by the reasonable investor as having signicantly altered the ‘total mix’ of information
made available.”
10
The determination of materiality is a mixed question of law and fact,
11
and there is no bright-line quantitative test
for materiality.
12
In adopting Regulation FD, for example, the SEC indicated that the following subjects should be
carefully reviewed to determine whether they are material:
13
• earnings information;
• mergers, acquisitions, tender oers, joint ventures, or changes in assets;
• new products or discoveries, or developments regarding customers or suppliers (for example, the acquisition
or loss of a contract);
• changes in control or in management;
• change in auditors or auditor notication that the issuer may no longer rely on an auditor’s audit report;
• events regarding the issuer’s securities – for example, defaults on senior securities, calls of securities for
redemption, repurchase plans, stock splits, or changes in dividends, changes to the rights of security holders,
public or private sales of additional securities; and
• bankruptcies or receiverships.
In addition, in Sta Accounting Bulletin No. 99, the SEC Sta pointed to several qualitative factors that may need
to be considered in assessing materiality and that could render a quantitatively minor misstatement material,
including whether the misstatement:
• arises from an item capable of precise measurement from an estimate and, if so, the degree of imprecision
inherent in the estimate;
• masks a change in earnings or other trends;
• hides a failure to meet analysts’ consensus expectations;
• changes a loss into income or vice versa;
• concerns a segment or other portion of the issuer’s business that has been identied as playing a signicant
role in the issuer’s operations or protability;
• aects the issuer’s compliance with regulatory requirements;
• aects the issuer’s compliance with loan covenants or other contractual requirements;
• has the eect of increasing management’s compensation – for example, by satisfying requirements for the
award of bonuses or other forms of incentive compensation; and
• involves concealment of an unlawful transaction.
Fraud in Connection With the Purchase or Sale of Securities – Rule 10b-5
Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5 provide a broad (and heavily litigated) basis for
both civil and criminal liability in securities transactions. Such claims can be brought by parties to the transaction
as well as by the SEC, the DOJ, and investors who were eecting transactions in the subject securities during the
period of improper disclosure. Rule 10b-5 prohibits, in connection with the purchase or sale of securities:
• employing “any device, scheme, or artice to defraud;”
31Liability Under the US Federal Securities Laws for Global IPOs
• making “any untrue statement of material fact” or omitting “to state a material fact necessary in order to make
the statements made, in the light of the circumstances under which they were made, not misleading;” or
• engaging in any “act, practice, or course of business which operates or would operate as a fraud or deceit.”
Elements of a Claim Under Rule 10b-5
The elements of a claim under Rule 10b-5 by a private plainti
14
are:
• a misrepresentation or omission of a material fact;
15
• made with scienter – that is, an intent to deceive, manipulate, or defraud,
16
meaning intentionally or recklessly
(beyond mere negligence);
17
• in connection with the purchase or sale of a security;
• upon which the plainti relied; and
• which caused the injury.
18
In government enforcement actions under Rule 10b-5, only the rst three elements apply.
The requirement that the alleged fraud must have been “in connection with” the purchase or sale of securities
is exibly construed to eectuate the remedial purposes of the Exchange Act, particularly when the SEC is the
plainti.
19
A private plainti, by contrast, must show that he or she actually purchased or sold stock,
20
but Rule 10b-
5 does not require privity between the defendant and the plainti,
21
and accordingly a plainti need not show that
he or she actually bought securities from the person who made the misleading statements.
Scope of Rule 10b-5
Rule 10b-5 covers oral and written statements, whether or not relating to a disclosure document.
22
These would
potentially include statements made during a press conference or an interview, or in a press release. In addition,
while an issuer is generally not liable for the statements of others, there may be exceptions. For example, the
issuer could be liable for misstatements in an analyst’s report if a corporate insider participates suciently in the
preparation of the report or circulates the report to prospective investors.
23
Insider Trading
Insider trading is also prosecuted under Rule 10b-5, civilly by the SEC and criminally by the DOJ. As interpreted
by the SEC and the US federal courts, Rule 10b-5 prohibits a person from buying or selling securities on the basis
of material nonpublic information, or providing such information to another person who trades, in violation of a
duciary duty or similar duty of trust and condence.
24
Rule 10b-5 imposes an obligation to either disclose material
nonpublic information or abstain from trading on:
• corporate insiders, such as directors, ocers, and controlling shareholders, who owe a duciary duty to the
issuer’s shareholders;
25
• temporary insiders, such as lawyers, accountants, or investment bankers;
26
and
• outsiders who “misappropriate” material nonpublic information for trading purposes in breach of a duty owed
to the source of the information.
27
32 Latham & Watkins – Global IPO Guide
PRACTICE POINT
Bear in mind that a person can be liable under Rule 10b-5 even if he or she did not actually trade on the
material nonpublic information, but instead passed it directly or indirectly to a third party – a practice known as
“tipping” – to get some “personal benefit.”
28
The personal benefit could be pecuniary gain (such as a kickback
or a “reputational benefit that will translate into future earnings”) or even the benefit one gets from making “a
gift of confidential information to a trading relative or friend.”
29
In addition to the tipper, the “tippee” (the person
to whom the information is disclosed) may also be liable under Rule 10b-5 if he or she trades on the basis of
the tipped information and had reason to know the information came from a person who violated a duty of trust
and confidence.
30
Damages Under Rule 10b-5
In private actions, violations of Rule 10b-5 can lead to rescission or damages.
31
Damages comprise a purchaser’s
out-of-pocket loss, which cannot exceed the dierence between the purchase or sale price the plainti paid or
received and the mean trading price of the security during the 90-day period beginning on the date on which the
information correcting the misstatement or omission that is the basis for the action is disseminated to the market.
32
Punitive damages are, however, not available in private actions under Rule 10b-5.
33
In civil or administrative actions, the SEC can obtain money penalties, disgorgement, and injunctions or cease-
and-desist orders. In criminal prosecutions, the DOJ can obtain penalties that include imprisonment, nes, and
disgorgement.
Extraterritorial Application of Section 10(b) and Rule 10b-5
Section 10(b) is silent about how it applies extraterritorially. In 2010, the US Supreme Court articulated a
“transactional” test in Morrison v. National Australia Bank Ltd., holding that Section 10(b) and Rule 10b-5
apply only to “transactions in securities listed on domestic [US] exchanges, and domestic transactions in other
securities.”
34
The impact of Morrison is to limit the number of securities class action lawsuits brought in the United
States against non-US issuers by non-US investors.
As to governmental actions, shortly after Morrison was decided, the US Congress, in Section 929P of the
Dodd-Frank Act, acted to specically allow for SEC and US Department of Justice actions to extraterritorial
claims when wrongful conduct occurred in the United States or when conduct outside the United States had a
“substantial eect” in the United States or on US citizens (referred to as the “conducts and eects test”).
The boundaries of the Morrison decision and US government authority continue to be developed in cases brought
before courts.
Controlling Person Liability
Liability under the US federal securities laws potentially extends beyond issuers, underwriters, and other direct
participants in securities oerings to the persons who control those participants. In particular, Section 15 of the
Securities Act and Section 20 of the Exchange Act provide that controlling persons may be jointly and severally
liable with the persons they control. As a result, an issuer’s signicant shareholders, its board of directors, and
members of its management may be liable along with the issuer for violations of Rule 10b-5.
The term “control” generally means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the ownership of voting securities, by
contract, or otherwise.
35
This is not a bright-line test, and instead depends on the facts and circumstances of any
particular case. A defendant generally will be found to have controlled an issuer if he or she actually participated
in (that is, exercised control over) the operations of the issuer and possessed the power to control the specic
transaction or activity from which the issuer’s primary liability derives.
36
Some courts have held that the defendant
must be a “culpable participant” in the issuer’s wrongful conduct in order to trigger liability.
37
33Liability Under the US Federal Securities Laws for Global IPOs
The controlling person has a defense to liability under Section 15 if he or she “had no knowledge of or reasonable
ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged
to exist,” and a defense under Section 20 if he or she “acted in good faith and did not directly or indirectly induce
the act or acts constituting the violation or cause of action.” This analysis is obviously quite fact specic
38
and may
depend on such factors as whether the defendant is an independent director.
PRACTICE POINT
Potential controlling persons such as controlling shareholders and members of an issuer’s board of directors
should familiarize themselves generally with the disclosure used in connection with an offering and should pay
particular attention to any high-level statements about an issuer’s strategy, business, or financial performance.
They should also review carefully any statements about themselves (for example, disclosure about a
controlling shareholder).
Enforcement
The SEC prosecutes civil violations of the US federal securities laws.
39
It has wide-ranging powers to investigate
any conduct that could constitute a violation of those laws.
40
SEC investigations are conducted by the Division of
Enforcement, which reports to the ve members appointed by the President of the United States who constitute
the Commission itself. If, after investigating, the Division of Enforcement believes it has found a violation, it
typically recommends to the Commission that enforcement action be taken. The Commission then decides by
majority vote whether to take action or not and what action to take. Charges may be brought administratively
within the SEC or in a US federal district court. In either venue, the preponderance-of-the-evidence standard of
proof applies, meaning that the nder of fact needs only to nd that it is more likely than not that the Division of
Enforcement has proved the elements of the oense. The proof need not be “clear and convincing” or “beyond
a reasonable doubt” (the latter being the standard of proof in criminal cases).
41
An adverse decision in an SEC
administrative or civil trial can be appealed to a US federal appellate court, and some appeals are eventually
heard by the US Supreme Court.
While the SEC has civil enforcement authority only, Section 24 of the Securities Act and Section 32(a) of the
Exchange Act make it a federal crime for any person to willfully violate any provision of those acts or a rule
promulgated under the acts. “Willfully” is not dened uniformly by all US federal courts, but in most courts it means
that the defendant knew his conduct was wrongful but did not necessarily know it was unlawful (whereas in the
SEC civil context “willfully” simply means that the actor was conscious of taking the action and not sleepwalking
or the like). Consequently, the SEC works closely with criminal law enforcement agencies throughout the US to
develop and bring criminal cases when the misconduct warrants more severe action and can be proved beyond a
reasonable doubt.
Criminal penalties under the federal securities laws can be severe. Under Securities Act Section 24, conviction for
each violation can result in a ne of up to $10,000 and/or imprisonment for up to ve years. Under Exchange Act
Section 32, for individuals, conviction can result in a ne of up to $5 million and/or imprisonment for up to 20 years
per violation; however, no one can be imprisoned for violating an Exchange Act rule or regulation if he or she proves
that he or she had no knowledge of the rule or regulation. Fines against entities can reach $25 million per violation.
34 Latham & Watkins – Global IPO Guide
ENDNOTES
1
Securities Act Section 2(a)(3).
2
David M. Brodsky & Daniel J. Kramer, Federal Securities Litigation, pp. 4-16 to 4-17 (1st ed. 1997) (Federal Securities Litigation).
3
Id., pp. 4-2 to 4-3.
4
Id., p. 5-20 (citing Pinter v. Dahl, 486 U.S. 622, 641-54 (1988)).
5
Federal Securities Litigation, p. 6-4.
6
Id., pp. 6-4 to 6-5.
7
See, e.g., Stansky v. Cummins Engine Co., Inc., 51 F.3d 1329 (7th Cir. 1995) (distinguishing duty to correct from duty to update).
8
See, e.g., In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997).
9
See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976); see also Securities Act Rule 405 (“material” information is “matters to
which there is a substantial likelihood that a reasonable investor would attach importance in determining whether to purchase the security
registered”). TSC involved the interpretation of Section 14(a) of the Exchange Act and Rule 14a-9. The Supreme Court has, however,
explicitly extended TSC’s denition of materiality to Rule 10b-5, Basic, Inc. v. Levinson, 485 U.S. 224, 231-32 (1988), and the lower US
federal courts have generally used the TSC standard in all contexts involving the antifraud provisions of the US federal securities laws.
See Louis Loss, Joel Seligman & Troy Paredes, Securities Regulation, Chapter 6.C.5 (Registration and Post Registration Provisions of the
1934 Act; Proxies, False or Misleading Statements (Rule 14a-9)), (5th ed. 2014) (Loss, Seligman & Paredes).
10
TSC Indus., Inc., 426 U.S. 438, 449.
11
Id., p. 450.
12
See Sta Accounting Bulletin 99.
13
Selective Disclosure and Insider Trading, Release No. 33-7881, n.47 (Aug. 15, 2000) (Regulation FD Release).
14
Many securities suits are brought as class actions, which are subject to the Private Securities Litigation Reform Act of 1995 (PSLRA).
Congress passed the PSLRA in 1995 to address the ling of frivolous or unwarranted securities lawsuits. Among other things, the PSLRA
imposes heightened pleading requirements in order to withstand a motion to dismiss, each of which applies to the elements of a fraud
claim, as discussed below.
15
In the case of an omission, a plainti must show that there was a duty to disclose the material facts; merely being in possession of
material nonpublic information does not, of itself, create a duty to disclose. Federal Securities Litigation, p. 6-4. Under the PSLRA,
the complaint must identify each specic statement or omission alleged to be false or misleading and explain why it is misleading.
15 U.S.C. § 78u-4(b)(1).
16
Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 (1976). The PSLRA requires the plainti to state particular facts giving rise to a strong
inference that the defendant made the allegedly false or misleading statement or omissions with the requisite state of mind, i.e., the intent
to manipulate, deceive or defraud. 15 U.S.C. § 78u-4(b)(2).
17
Federal Securities Litigation, pp. 6-13 to 6-14. Recklessness is typically dened by courts as conduct demonstrating an extreme departure
from the standard of ordinary care.
18
Under the PSLRA, the plainti has the burden to prove that the false, misleading, or omitted information was the cause of the actual loss
the plainti suered. 15 U.S.C. § 78u-4(b)(4).
19
Cf., e.g., SEC v. Zandford, 535 U.S. 813, 822 (2002).
20
Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 754-55 (1975).
21
Loss, Seligman & Paredes, Chapter 9.B.7 (Fraud; Issuers and Insiders; Scope of Rule 10b-5), n.678.
22
See id. (explaining that “[t]he Rule may be violated by feeding misinformation into the marketplace, or even withholding information too
long,” regardless of whether the defendants themselves bought or sold securities) (citation omitted).
23
Federal Securities Litigation, pp. 6-30 to 6-31. The SEC has stated that an issuer may be “fully liable” if it disseminates and adopts false
third-party reports “even if it had no role whatsoever in the preparation of the report.” Use of Electronic Media Release, n.54 (citing In the
Matter of Presstek, Inc., Release 34-39472 (Dec. 22, 1997)).
24
Federal Securities Litigation, p. 6-32.
25
Federal Securities Litigation, pp. 6-32 to 6-33.
26
Id., p. 6-34; see also Regulation FD Release, n.28 (referring to a temporary insider as “a person who owes a duty of trust or condence to
the issuer,” such as an attorney, investment banker, or accountant).
27
Id., pp. 6-34 to 6-35 (citing United States v. O’Hagan, 521 U.S. 642 (1997)). The SEC has added two rules to clarify issues that have
arisen in insider trading cases. First, Rule 10b5-1 provides that trading “on the basis of” material nonpublic information includes all trading
while in possession of that information, except certain trades previously contracted for in good faith and not as part of a plan or scheme to
evade the prohibitions of Rule 10b5-1. Second, Rule 10b5-2 eshes out the meaning of a “duty of trust or condence” for purposes of the
misappropriation theory.
28
SEC v. Dirks, 463 U.S. 646 (1983).
35Liability Under the US Federal Securities Laws for Global IPOs
29
Id.; see also SEC v. Yun, 327 F.3d 1263 (11th Cir. 2003) (applying the Dirks personal benet rule to misappropriation case).
30
Federal Securities Litigation, p. 6-34.
31
Id., p. 6-42.
32
Exchange Act Section 21D(e)(1); see also Exchange Act Sections 21(d)(3) (providing for money penalties in SEC civil actions) and 32(a)
(providing for criminal penalties for willful violations of the Exchange Act); Federal Securities Litigation, pp. 6-43 to 6-45 (discussing
damages under Exchange Act Section 10(b)).
33
Federal Securities Litigation, p. 6-42; see also Exchange Act Section 28(a) (limiting recovery for damages in actions under the Exchange
Act to actual damages).
34
130 S.Ct 2869, 2884 (2010).
35
Securities Act Rule 405; see also Exchange Act Rule 12b-2.
36
Federal Securities Litigation, p. 11-5.
37
Id., pp. 11-5 to 11-7.
38
See generally id., pp. 11-7 to 11-10 (discussing the defense).
39
For a comprehensive discussion of SEC Enforcement practice, see, for example, The Securities Enforcement Manual: Tactics and
Strategies (Richard M. Phillips, ed. 1997); William R. McLucas, J. Lynn Taylor & Susan A. Mathews, A Practitioner’s Guide to the SEC’s
Investigative and Enforcement Process, 70 Temp. L. Rev. 53 (1997).
40
See SEC v. Murphy, [1983-1984 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 99,688 (C.D. Cal. 1983).
41
Steadman v. SEC, 450 U.S. 91 (1981).
36 Latham & Watkins – Global IPO Guide
LEGAL MATTERS
A cast of outstanding lawyers too numerous to name have passed upon the contents of this Global IPO Guide on
behalf of Latham & Watkins LLP.
WHERE YOU CAN FIND MORE INFORMATION
We maintain extensive thought leadership resources on our website at https://www.lw.com and at our capital
markets online reference library, www.wowlw.com. We list below some materials that you may nd useful for your
global IPO.
• The Latham FPI Guide: Accessing the US Capital Markets from Outside the United States (2023)
• Guide to Financial Statement Requirements in US Securities Oerings by Non-US Issuers (2024)
• Dening Foreign Private Issuers: Are You a Wizard or a Muggle? (2018)
• The Last Days of Disco Ops (2014)
• The Good, the Bad, and the Oer: Law, Lore, and FAQs (2014)
• “You Talkin’ to Me?” FAQs About the SEC’s New General Solicitation, Regulation D, and “Bad Actor” Rules
(2013)
• Giving Good Guidance: What Every Public Company Should Know (2012)
• The JOBS Act, Part Deux: Frequently Asked Questions About Title II of the JOBS Act (2012)
• The JOBS Act After Two Weeks: The 50 Most Frequently Asked Questions (2012)
• The JOBS Act Establishes IPO On-Ramp (2012)
• Recent Developments In Recent Developments — Using “Flash” Numbers in Securities Oerings (2011)
• Cheap Stock: An IPO Survival Guide (2010)
• Adjusted EBITDA is Out of the Shadows as Sta Updates Non-GAAP Interpretations (2010)
37Report of Non-Independent Editors
REPORT OF NON-INDEPENDENT EDITORS
The Readers of the Latham & Watkins Global IPO Guide:
We have edited the accompanying Global IPO Guide as of March 15, 2024. The Global IPO Guide reects the
accumulated wisdom of the lawyers at Latham & Watkins LLP. Our responsibility is to express an opinion on the
Global IPO Guide based on our role as non-independent editors.
We conducted our edits in accordance with our standards for top-quality thought leadership. Those standards
require lively, plain-English explanations to demystify complicated concepts. They strive for the highest possible
level of technical accuracy with the least amount of mind-numbing gobbledygook.
In our opinion, the Global IPO Guide is properly drawn up in accordance with the standards set above and gives a
true and fair view, in all material respects, of what you need to know to plan and execute a successful global IPO.
/s/ Anderson, Cohen, Dudek & Trotter, LLC
Washington, D.C.
March 15, 2024
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* Source: IPO Vital Signs
