When you prepare for your company's public stock offering, you of course want the investment community to know as much as possible about your company and its prospects. But the "quiet period"- typically 90 days to several months' time before a stock is first offered to the market - constrains what and how much can be communicated.
According to Marilyn Vollrath, president of Vollrath Associates, a Milwaukee PR/IR firm, the quiet period begins with the filing of paperwork with the U.S. Securities and Exchange Commission to announce an intention to offer securities for sale.
Those who believe the quiet period requires clamping down on communications misunderstand its purpose.
What's limited are changes or increases in communication about a company and the possible prospects for a company's stocks.
Regulations generally allow you to "continue what you've been doing," says Jack Eversull of the Eversull Group, a Dallas-based investor relations firm. "But if you haven't had a pretty strong program going, you can't jump up and do something new."
Agrees Doug Poretz of the Poretz Group, a McLean, Va., IR firm: "Quiet doesn't mean go mute. Just don't do anything you haven't done before."
Poretz says his firm has a number of "pre-public clients" that have not - as of yet - filed to make stock offerings, but which maintain a steady stream of communications.
The companies' activities include presenting at investor conferences, which will enable them to sustain a flow of financial communications should they announce plans for an offering.
What About Your Web Site?
Companies must use their Web sites carefully for any communications prior to or during the quiet period.
Eric Morgenstern, president of Morningstar Communications Co., Overland Park, Kan., advises companies to think of online communications as "just another communications channel."
If your pattern of communications before the quiet period includes getting information to the investment community through mail, faxes, new releases or in-person meetings, it is appropriate for this same information to be presented on the company Web site.
But if the information on your Web site is different than what has been communicated through these more traditional channels, a company could invite unwanted scrutiny from the SEC.
Involve Legal Counsel
Whatever pre-IPO communications may be contemplated, they should involve the company's legal counsel and others steeped in SEC rules and knowledgeable about the communications program that has taken place so far, says Morgenstern.
That's particularly true since the quiet period is a "matter of practice," rather than a procedure governed by "black-letter law," says John Heine, a spokesman with the SEC in Washington, D.C. In other words, the length of quiet period time, when it must commence and the types and amounts of communications permissible, are all tied to legal judgements about the anti-fraud provisions of securities laws, which prohibit attempts to improperly "condition" the market close to the time securities are first offered. (Jack Eversull, 972/991-1672; Eric Morgenstern, 913/851-8700; Doug Poretz, 703/506-1778; SEC, 202/942-0020; Marilyn Vollrath, 414/240-2400)