Question 1

What is an IPO road show under SEC rules?

Accepted Answer

Securities Act Rule 433(h)(4) (17 CFR 230.433(h)(4)) defines a road show as an offer — other than a statutory prospectus or a portion of a statutory prospectus filed as part of a registration statement — that contains a presentation regarding an offering by one or more members of the issuer's management and includes discussion of one or more of the issuer, such management, and the securities being offered. The definition was adopted as part of the SEC's Securities Offering Reform rules (70 FR 44815, August 3, 2005), which codified Rule 433's framework for post-filing free writing prospectuses. For an offering of asset-backed securities, the definition extends to presentations by management involved in the securitization or servicing function of a depositor, sponsor, or servicer (as defined in Item 1101 of Regulation AB) or an affiliated depositor. Because a road show is by definition an 'offer,' the communication rules of Securities Act Section 5 govern when and how it may occur.

Question 2

When in the IPO process does the road show take place?

Accepted Answer

After the registration statement is on public file and before the offering is priced and becomes effective. Securities Act Section 5(c) makes it unlawful to offer a security before a registration statement has been filed, and a road show is an offer under Rule 433(h)(4). For issuers that used the SEC's draft registration statement (DRS) process, the Division of Corporation Finance's conditions require the registration statement, the initial nonpublic draft, and all draft amendments to be publicly filed at least 15 days before the issuer conducts its road show. The Division's FAQs state that an issuer conducting an initial public offering must publicly file its registration statement, the initial nonpublic draft registration statement, and all draft amendments at least 15 days before it conducts its road show or, if there is no road show, at least 15 days before the effective date. For emerging growth companies the 15-day requirement is statutory under Securities Act Section 6(e) (21 days as enacted by the JOBS Act in 2012; shortened to 15 days by Section 71001 of the FAST Act, December 4, 2015). Sales remain prohibited until the registration statement is effective (Securities Act Section 5(a)), and the SEC's investor bulletin on IPOs states that the underwriters typically will have obtained indications of interest from prospective investors prior to effectiveness.

Question 3

Who presents at a road show, and who can see it?

Accepted Answer

Under Rule 433(h)(4), the road show presentation is made by one or more members of the issuer's management, and it addresses the issuer, its management, and the securities being offered. The SEC's investor bulletin on IPOs describes the underwriters soliciting indications of interest from the client-investors they select. Rule 433(d)(8)(ii) separately contemplates unrestricted public access: a 'bona fide electronic road show' may be made available without restriction by means of graphic communication to any person, including any potential investor in the securities. The unrestricted-availability mechanism in Rule 433(d)(8)(ii) matters for issuers that are not Exchange Act reporting companies when the registration statement is filed and are offering common equity or convertible equity securities: making at least one version of a bona fide electronic road show available without restriction to any person relieves such an issuer of the requirement to file its written road show with the SEC. Where more than one written version of the road show exists, the unrestricted version must be made available no later than the other versions.

Question 4

What is the difference between a live road show and a written or electronic road show?

Accepted Answer

The dividing line is whether the road show is a 'written communication.' Rule 405 (17 CFR 230.405) defines a written communication as any communication that is written, printed, a radio or television broadcast, or a graphic communication — and it excludes from 'graphic communication' a communication that, at the time of the communication, originates live, in real-time to a live audience and does not originate in recorded form, even though it is transmitted through graphic means. Under these definitions, a road show presented live and in real time to a live audience — including one transmitted electronically in real time, such as a live webcast that does not originate in recorded form — is not a graphic communication and therefore is not a written communication. A road show that originates in recorded form is a graphic communication and therefore a written communication. Rule 405 defines graphic communication to include all forms of electronic media — including audiotapes, videotapes, facsimiles, CD-ROM, electronic mail, Internet websites, substantially similar messages widely distributed on telephone answering or voice mail systems, computers, computer networks, and other forms of computer data compilation.

Question 5

Is a written road show a free writing prospectus, and must it be filed with the SEC?

Accepted Answer

Yes, it is a free writing prospectus — and generally it need not be filed. Rule 433(d)(8)(i) provides that a road show for an offering that is a written communication is a free writing prospectus, and that, except as provided in Rule 433(d)(8)(ii), a written communication that is a road show is not required to be filed. This is an exception to Rule 433's baseline filing conditions: under Rule 433(d)(1), an issuer must otherwise file any issuer free writing prospectus with the SEC by a means reasonably calculated to result in filing no later than the date of first use. The exception for written road shows is itself qualified by Rule 433(d)(8)(ii) for certain equity offerings by non-reporting issuers. Free writing prospectuses that are used but not filed — including unfiled road shows that are written communications — must be retained by issuers and offering participants for 3 years following the initial bona fide offering of the securities (Rule 433(g)).

Question 6

What is a 'bona fide electronic road show'?

Accepted Answer

Rule 433(h)(5) defines a bona fide electronic road show as a road show that is a written communication transmitted by graphic means that contains a presentation by one or more officers of an issuer or other persons in an issuer's management and — if more than one road show that is a written communication is being used — includes discussion of the same general areas of information regarding the issuer, such management, and the securities being offered as the other written road shows for the same offering. The concept operates with Rule 433(d)(8)(ii): where a written-communication road show would otherwise have to be filed (an offering of common equity or convertible equity securities by an issuer that is not required to file Exchange Act reports at the time the registration statement is filed), no filing is required if the issuer makes at least one version of a bona fide electronic road show available without restriction by means of graphic communication to any person, including any potential investor in the securities — and, if there is more than one written version, the unrestricted version is made available no later than the other versions. For asset-backed securities offerings, the presentation may be by management involved in the securitization or servicing function of a depositor, sponsor, or servicer (as defined in Item 1101 of Regulation AB) or an affiliated depositor.

Question 7

What conditions must a road show that is a free writing prospectus satisfy in an IPO?

Accepted Answer

For an issuer that does not qualify as a seasoned or well-known seasoned issuer, Rule 433(b)(2)(i) conditions use of an issuer or offering-participant free writing prospectus on a registration statement having been filed that includes a prospectus satisfying Securities Act Section 10 — including a price range where required by rule — and on the free writing prospectus being accompanied or preceded by the most recent such statutory prospectus. For an electronic free writing prospectus, the accompanied-or-preceded condition is satisfied by an active hyperlink to the most recent statutory prospectus (Note 1 to Rule 433(b)(2)(i)). A free writing prospectus used in reliance on Rule 433 must also contain substantially the legend prescribed by Rule 433(c)(2)(i), which advises recipients that the issuer has filed a registration statement (including a prospectus), that they should read the prospectus and other filed documents before investing, and that the documents are available for free on EDGAR at www.sec.gov. Under Rule 164(a) (17 CFR 230.164), a free writing prospectus that satisfies Rule 433's conditions is treated as a Section 10(b) prospectus for purposes of Section 5(b)(1); Rule 164(b) provides that an immaterial or unintentional failure to file or delay in filing will not result in a Section 5(b)(1) violation if a good faith and reasonable effort was made to comply and the failure is cured as soon as practicable after discovery.

Question 8

What limits apply to what is said during a road show?

Accepted Answer

A free writing prospectus — including a written road show — may include information the substance of which is not included in the registration statement, but under Rule 433(c)(1) that information must not conflict with information contained in the filed registration statement (including any prospectus or prospectus supplement that is part of it) that has not been superseded or modified. A live road show is an oral offer made under Securities Act Section 5, and its statements carry federal antifraud liability. The Note to Rule 433(d)(8) addresses accompanying materials: a communication provided or transmitted simultaneously with a road show, in a manner designed to make it available only as part of the road show and not separately, is deemed part of the road show — so if the road show is not a written communication, the simultaneous communication is also deemed not written, and if the road show is written but not required to be filed, the simultaneous communication also need not be filed. By contrast, a written offer contained in a separate file from the road show, or transmitted separately, is a free writing prospectus subject to Rule 433(d)'s applicable filing conditions. Rule 164's preliminary notes add that the rule is unavailable for any communication that, although in technical compliance, is part of a plan or scheme to evade the requirements of Securities Act Section 5.

Question 9

What liability attaches to road show statements?

Accepted Answer

Securities Act Section 12(a)(2) (15 U.S.C. 77l(a)(2)) makes any person who offers or sells a security by means of a prospectus or oral communication that includes an untrue statement of a material fact — or omits a material fact necessary to make the statements not misleading — liable to the purchaser, unless the seller sustains the burden of proving it did not know, and in the exercise of reasonable care could not have known, of the untruth or omission. SEC Rule 10b-5 (17 CFR 240.10b-5), adopted under Section 10(b) of the Securities Exchange Act of 1934, separately makes it unlawful, in connection with the purchase or sale of any security, to make any untrue statement of a material fact or to omit a material fact necessary to make the statements made not misleading, to employ any device, scheme, or artifice to defraud, or to engage in any act, practice, or course of business that operates as a fraud or deceit. These provisions reach both live (oral) road show statements and written or electronic road show materials.

Question 10

How does the road show relate to bookbuilding and IPO pricing?

Accepted Answer

The SEC's Updated Investor Bulletin: Investing in an IPO (October 14, 2022) explains that the underwriters typically will have obtained 'indications of interest' from prospective investors prior to effectiveness and use that information to recommend a price for the shares to the issuer, which ultimately determines the price of the IPO. The 'order book' is the compilation of indications of interest the underwriters have obtained from the client-investors they solicited, listing how many shares each client-investor would like to purchase and at what price. The bulletin adds that valuation analyses — which can be conducted by underwriters or potential investors — attempt to value the company based on its revenues, customers, financial results, and other metrics, and that these analyses and the order book inform the determination of the offering price, which reflects a negotiated estimate of the company's value. Indications of interest are gathered while sales remain prohibited: under Securities Act Section 5(a), no sale of the registered securities may occur until the registration statement is effective.

Question 11

How does the road show differ from testing-the-waters communications?

Accepted Answer

They are distinct stages with different audiences and rules. Testing-the-waters communications — permitted for emerging growth companies by Securities Act Section 5(d) (JOBS Act, 2012) and for all issuers by Rule 163B (17 CFR 230.163B, effective December 3, 2019) — are oral or written communications with qualified institutional buyers and institutional accredited investors to gauge interest in a contemplated offering, and they may occur either before or after the registration statement is filed. The road show is an offer as defined in Rule 433(h)(4), conducted after the registration statement is on public file, and it is the event that fixes the draft registration statement public-filing deadline. Rule 163B exempts qualifying testing-the-waters communications from Securities Act Sections 5(b)(1) and 5(c), with no filing or legending requirement, but limits them to persons the issuer reasonably believes are qualified institutional buyers or institutional accredited investors. The road show carries no such audience limitation — Rule 433(d)(8)(ii) expressly contemplates a bona fide electronic road show available without restriction to any person — but, as an offer made by means of the road show presentation, it operates within the post-filing framework of Rules 164 and 433 and the Division of Corporation Finance's condition that previously nonpublic draft registration statements be publicly filed at least 15 days before the road show.

Question 12

Is a road show legally required in an IPO?

Accepted Answer

SEC requirements are written to accommodate registered offerings that have no road show. The Division of Corporation Finance's draft registration statement conditions provide that an issuer conducting an initial public offering must publicly file its registration statement, the initial nonpublic draft, and all draft amendments at least 15 days before it conducts its road show 'or, if there is no road show, at least 15 days before the effective date.' The same either/or structure appears throughout the Division's conditions for initial Securities Act and Exchange Act registrations reviewed nonpublicly. Where an issuer conducts no road show, the 15-day public-filing period runs to the effective date instead; the substantive requirements of the offering — a filed and effective registration statement before any sale (Securities Act Sections 5(a) and 5(c)) — apply identically whether or not a road show is held.

Road show format	Regulatory treatment	Filing / availability condition	Authority
Live, in-person road show	Originates live, in real time, to a live audience — not a graphic communication, so not a written communication and not a free writing prospectus; it is an oral offer subject to Securities Act Section 5 and to antifraud liability for oral communications (Section 12(a)(2))	No Rule 433 filing condition applies	17 CFR 230.405 (graphic communication); Securities Act §12(a)(2) · source
Live road show transmitted electronically in real time to a live audience	Excluded from 'graphic communication' because it originates live, in real time, to a live audience and does not originate in recorded form — even though it is transmitted through graphic means; therefore not a written communication and not a free writing prospectus	No Rule 433 filing condition applies	17 CFR 230.405 (graphic communication, exclusion) · source
Pre-recorded or replayed electronic road show	Originates in recorded form — a graphic communication and therefore a written communication; under Rule 433(d)(8)(i) a road show that is a written communication is a free writing prospectus	Not required to be filed, except as provided in Rule 433(d)(8)(ii); must satisfy the applicable Rule 433 conditions (Section 10 prospectus on file including any required price range, statutory-prospectus accompaniment or hyperlink, legend, no conflict with the registration statement); if unfiled, retained for 3 years under Rule 433(g)	17 CFR 230.433(d)(8)(i), (b)(2), (c), (g) · source
Written road show — common equity or convertible equity IPO by a non-reporting issuer	A free writing prospectus that is required to be filed with the SEC where the issuer is not required to file Exchange Act reports under Section 13 or 15(d) at the time the registration statement is filed	The road show is required to be filed unless the issuer makes at least one version of a bona fide electronic road show available without restriction by means of graphic communication to any person, including any potential investor in the securities — with the unrestricted version made available no later than any other written versions	17 CFR 230.433(d)(8)(ii) · source
Bona fide electronic road show	A road show that is a written communication transmitted by graphic means, containing a presentation by one or more officers or other persons in the issuer's management; if multiple written road shows are used, it must discuss the same general areas of information regarding the issuer, management, and the securities as the other versions	Making at least one version available without restriction to any person satisfies the availability condition that lifts the filing requirement of Rule 433(d)(8)(ii)	17 CFR 230.433(h)(5) · source
Materials provided with or separate from the road show	A communication provided or transmitted simultaneously with a road show, and available only as part of it, is deemed part of the road show and takes its character (not written if the road show is not written; not required to be filed if the road show is written but exempt from filing)	A written offer contained in a separate file from the road show, or transmitted separately, is a free writing prospectus subject to the applicable filing conditions of Rule 433(d)	17 CFR 230.433, Note to paragraph (d)(8) · source

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