As equity valuations of public companies remain high in comparison to recent historical norms, the use of public company stock as an acquisition currency by SEC registrants in acquisitions of private companies will continue, particularly if interest rates continue to rise, thus increasing the costs associated with leveraged transactions. This blog explores legal considerations associated with the issuance of stock by a public company in connection with its acquisition of a private company.…

In monitoring SEC comment letters, we came across this SEC comment letter recently made public.  While we acknowledge the term “pro forma” is often used by registrants when adjusting their GAAP results to provide additional meaningful information to investors, this comment by the Staff serves as a reminder to registrants that the Staff generally dislikes non-GAAP measures titled as “pro forma” when the information is not presented in compliance with the pro forma rules in…

On October 16, 2018, the SEC issued a 21(a) report announcing that it had investigated whether certain public companies that were victims of oftentimes unsophisticated, cyber-related frauds had violated federal securities laws by failing to have a sufficient system of internal accounting controls in place to detect these events. Focus of SEC Report The report focused on two common cyber frauds involving spoofed or otherwise compromised electronic communications. The first involved emails that purported to…

We have previously blogged about recent SEC rule changes to the definition of “smaller reporting company” (SRC) (see here) and XBRL (see here).  Our readers should know that a byproduct of these new rules include certain tweaks to the cover pages of most Securities Act and Exchange Act forms. The cover page changes related to the definition of SRC were effective September 10, 2018, while the XBRL-related cover page changes will be effective…

On August 17, the SEC adopted amendments intended to simplify and update the disclosure of information to investors and reduce compliance burdens for companies without significantly altering the total mix of information available to investors.  The amendments are effective 30 days after their publication in the Federal Register. The amendments eliminate certain: Redundant and duplicative requirements, which require substantially similar disclosures as GAAP, International Financial Reporting Standards (IFRS) or other SEC disclosure requirements. Overlapping requirements,…

On July 24, the SEC proposed amendments to Rule 3-10 of Regulation S-X for guarantors and issuers of guaranteed securities registered or being registered, as well as the financial disclosure requirements in Rule 3-16 of Regulation S-X for affiliates whose securities collateralize securities registered or being registered.  Here is the proposing release.  The proposed changes are intended to provide investors with material information given the specific facts and circumstances, make the disclosures easier to understand,…