Over the last year, the Securities and Exchange Commission (“SEC”) clearly articulated its desire to modernize regulation and oversight of the public markets to keep pace with evolving technologies and market structures, and reduce reporting burdens. This includes ambitions to modernize the initial public offering (“IPO”) process. In fact, just last week at the Stanford Rock Center for Corporate Governance, Chair Paul Atkins’ called for changes to the existing “gun-jumping” framework and rules governing how issuers communicate before and during the IPO process.
While relaxing restrictions around pre-IPO communications may be viewed as a welcome development for companies considering a public listing, any real changes to IPO regulations will take time. There are core communications principles that will remain true regardless of how gun-jumping rules may evolve.
The Communications Challenge Is Expanding
In IPO processes, communications teams have always operated within a risk management framework. Historically, companies have had relatively few avenues for offering-related communications, relying primarily on formal press releases, private analyst days and investor meetings, and limited interaction with traditional financial media. The current “gun-jumping” rules, which have not been updated in more than 20 years, significantly restrict how companies communicate during the registration process ahead of the IPO.
Today’s global media environment is decentralized, instantaneous, and increasingly difficult to manage, even for the most cautious companies. Information now travels faster and through more channels than ever before.
Regardless of whether the SEC modernizes elements of the pre-IPO restrictions, communications leaders undoubtedly find themselves with both greater opportunity and responsibility in shaping how companies engage markets during periods of heightened scrutiny.
How To Ensure You Are Ready to Meet the Challenge
1. Craft a Compelling, Consistent Narrative That Resonates Across Stakeholders
Companies should build a durable narrative framework that remains consistent across audiences, channels, and spokespeople. In today’s environment, the challenge is not only limiting communication, but also ensuring every stakeholder hears the same core story.
Issues typically arise when messages or disclosures lack context or consistency, create conflicting expectations amongst different stakeholders, or diverge from the company's broader narrative and investment thesis.
To mitigate this risk, companies should consider establishing:
- Pre-approved messaging frameworks for sensitive or potentially market-moving topics
- Clear guidance on the metrics and KPIs that can be discussed publicly (and the ones that cannot)
- Alignment around core company themes, strategic priorities, and investment narratives
- Consistent social media and external communications policies across corporate and executive channels
Whether or not the SEC ultimately modernizes the rules governing pre-IPO communications, companies that establish a clear messaging framework and maintain consistency across stakeholder groups will be better positioned to navigate the IPO process.
2. Communicate and Educate Internally
The classification of company spokespeople goes beyond just the C-suite, Board, and communications teams. In certain circumstances, employee statements may be attributed to the issuer. Information employees share, whether with external stakeholders or on their own social channels, can be scrutinized under SEC guidelines.
Regardless of where a company is in its IPO journey and how the SEC’s posture evolves, it is prudent to institute early and frequent education on disclosure do’s and don’ts and establish clear guidelines for all employees, particularly around sharing sensitive information such as financial performance, forecasts, and investments.
3. Define Channels for Dissemination, Including Social Media
Today’s gun-jumping framework was designed for a slower moving media environment – one that lacked the accessibility and breadth of information we have today. Under the current rules, social media engagement could be viewed as solicitation and might unintentionally amplify offering-related messaging.
To prepare for these realities, companies should consider:
- Defining what constitutes an official company communication
- Identifying approved channels for regular disclosure and engagement
- Establishing ownership and oversight of those channels
- Maintaining clear policies governing executive and employee participation in media interviews, podcasts, conferences, and social platforms
4. Integrate Critical Functions: Communications, Legal, and Investor Relations
Today’s market narratives are shaped across multiple channels in real time. A single off-message remark, a poorly contextualized statement, or an inadvertent disclosure can quickly become amplified beyond its original audience.
Many pre-IPO organizations still run legal and communications functions independently rather than in close coordination, and some have yet to establish investor relations capabilities. While that approach might work for a private company, it becomes increasingly difficult to sustain for the public markets.
In this dynamic environment, close coordination between these functions is critical. Establishing open lines of communication, defined decision-making processes, and escalation protocols can help companies mitigate risk while responding quickly, consistently, and confidently during periods of heightened scrutiny.
The Strategic Implication
Regardless of the SEC’s final rule, the implication for companies is clear: communications obligations are evolving, and more sophisticated communications management is required in today’s environment. Companies should not interpret the potential for greater flexibility as reduced scrutiny. If anything, a more dynamic communications environment will place greater importance on coordination, consistency, and disciplined execution across every channel and stakeholder group.
By Ashley Firlan, Senior Vice President, Special Situations & Investor Relations, Nicole Harlowe, Senior Vice President, Special Situations & Investor Relations, and Ashna Vasa, Vice President, Special Situations and Investor Relations