We reviewed 240 SEC comment letter exchanges on IPO prospectuses over the last three years. Three findings.
First, the median number of comment letters per filing is two. Filings that drew three or more letters had a common feature: a mismatch between the risk factor narrative and the MD&A.
Second, the most common comment topic is not accounting. It is disclosure of material agreements — specifically, the question of whether an agreement is material and, if so, whether the description in the prospectus satisfies Item 601.
Third, comment letters extend the timeline. The median interval between confidential submission and public filing grew by 22% over the three-year period.
The practical implication: build the comment letter response into the deal timeline from the start. Issuers who treat the SEC review as a discrete, scheduled step close on time. Issuers who treat it as a surprise do not.
Written by Sarah Chen, Partner.
This article is for general information only and is not legal advice.