The Jumpstart Our Business Startups (Jobs) Act has altered in certain
fundamental ways the landscape of the federal securities laws. One such
change permits issuers that qualify as emerging growth companies (EGCs)
and their underwriters to test the waters with qualified institutional
buyers or institutional accredited investors before and after the filing
of a registration statement to determine their level of interest in the
contemplated securities offering.
This type of pricing discovery should prove especially useful to
EGC's in connection with the initial public offering (IPO) process.
The Securities Act of 1933 generally makes it unlawful for any person
to make any offer to sell a security unless a registration statement
with respect to the security is on file with the SEC. Similarly, while
oral offers are permitted following the filing of a registration
statement, written offers are generally prohibited unless made by means
of a compliant prospectus.