The initial public offering (IPO) process includes a long list of responsibilities, and filing several disclosure forms is among the most important. Determining which documents to provide and assembling the information can take a significant amount of time. Among the disclosure forms that corporations must file is SEC Form 424. This form provides information about the offering for investors to review and use to decide whether to buy shares.
Reading the guide below can help businesses understand the different variations of Form 424 they may need to file, details they must provide on the form, and best practices for ensuring acceptance by the U.S. Securities and Exchange Commission (SEC).
What is SEC Form 424?
When companies decide to go public and offer shares on the open market, they must file a number of documents with the SEC, in accordance with the Securities Act of 1933. That includes a prospectus — the formal written document that provides detailed information about the company, the offering, and the risks involved. Form 424 is part of the prospectus filing process. Form 424 deals with specific types of prospectus filings, including amendments, supplements, and pricing information after the registration statement is effective.
Types of Form 424 Filings
The IPO timeline includes multiple disclosure obligations, including specific variations of SEC Form 424, each used at different stages of the offering process. These include:
- 424B1: The complete prospectus, filed when the registration statement does not contain all required information.
- 424B2: Used for securities offered under a shelf registration, this includes pricing and other details for a delayed or continuous offering.
- 424B3: A prospectus used to reflect information previously omitted from the effective registration statement or to comply with prospectus delivery requirements, typically when no post-effective amendment is required.
- 424B4: Often used as the final prospectus, particularly when the registration statement did not initially include pricing and other final terms. Depending on the structure, a final prospectus may also be filed as 424B2 or 424B3.
- 424B5: A supplement to previously filed prospectuses (often under 424B2 or 424B3), used to add or update material information during a shelf offering.
The type of Form 424 filed depends on the structure and stage of the offering. Not all companies will file every variation; the appropriate form is dictated by the nature of the registration (e.g., standard IPO vs. shelf offering) and the timing of changes. Legal or financial advisors typically guide companies on which variation to use for accurate compliance.
Purpose and Importance of Form 424
The primary goal of SEC Form 424 is to provide potential investors with key details about the public offering. Investors need certain information to determine whether to purchase shares, including the price, number of available shares, and underwriters. The form itself, published for public review, provides investors with time to compare the terms of the offering with other investment options and make an educated decision.
SEC filings like Form 424 aim to create transparency involving public investment in companies. Investors take a risk when they invest in a company, knowing that they could make a good profit or lose everything. The risk inherent to public offerings calls for a high degree of transparency throughout the process, to protect investors. In turn, the commitment to compliance with the SEC shows investors that the company follows full and fair disclosure requirements. In cases where businesses are charged with the release of false information, a full disclosure in the accompanying prospectus can provide clarity for legal review.
Key Information Disclosed in SEC Form 424
The information required in SEC Form 424 depends on the specific reason for the filing, whether companies are registering a completely new security or making changes to an existing filing. Filings often are several pages long, with myriad details about company finances and plans for the funding. Common elements include:
- Pricing per share
- Duration of offering (for shelf or continuous offerings)
- Number of shares available for purchase
- Company proceeds based on the number of shares purchased
- Detailed plan for the use of proceeds
- Risk factors inherent to the investment, specific to the company
- Financial data, with references to existing filings or other disclosures
- Existence of current legal proceedings or other regulatory concerns that may affect the company’s ability to function
- Underwriter information
To have a successful offering, companies should provide as much detail as possible in the SEC form filing. Extensive information and clear references to other public documents can help build trust with prospective investors, as well as protecting against future claims of misinformation.
Form 424 Filing Requirements and Timing
Companies generally file SEC Form 424 after the SEC has declared the registration statement effective, often on or just before the pricing date of the public offering. The final prospectus — most commonly filed as Form 424B4 — must reflect key terms such as the public offering price, number of shares, and underwriter discounts.
The timing for filing is coordinated closely with the underwriting process and is typically aligned with the offering launch. Companies must file the prospectus promptly after pricing, and it becomes publicly accessible via EDGAR, the SEC’s online filing system.
Common Filing Mistakes and How to Avoid Them
Although Form 424 is a routine filing for any company preparing for an IPO or secondary offering, many businesses encounter issues during the filing process. Common errors include:
- Publishing errors in pricing or number of shares
- Submitting the wrong variation of Form 424
- Failing to provide sufficient information or reference to existing disclosures
Mistakes in filings often heighten SEC scrutiny, increasing the likelihood of a delay in the public offering while the company works to revise the documents. By comparison, accuracy in filing can help speed corporations toward a successful IPO.
Businesses can use SEC filing software such as DFIN’s ActiveDisclosure® to avoid common problems and ensure timely compliance. The ActiveDisclosure® platform provides the necessary components for a seamless EDGAR filing, with real-time collaboration tools, inline XBRL compatibility, and dedicated support teams. To learn more about our IPO solutions, request a demo today.
