Modernizing the IPO Process
Many of the rules governing the IPO process were made in the dark ages before the Internet when IPO's were reserved for sophisticated investors. Having gained investment sophistication through managing their own retirement plans and gaining access to information through the Internet, individual investors have become a force in the market that cannot be ignored -- witness the Internet bubble of 1999-2000.
The IPO process needs to be revamped to account for the presence of individual investors in the market and the changes in information flow brought about by the Internet. Since the Internet bubble burst in 2000, many new regulations intended to restore investor confidence were put into place improving corporate governance and reforming Wall Street; however, of greater need is a review of the opportunities that the Internet can bring to the IPO process making it more transparent with more timely, accessible, and organized information flow. We believe that the transparency that can be accomplished through the Internet will do more to curb IPO abuses than all the regulations and fines imposed to date.
Renaissance Capital's Top Ten IPO Reforms
Require underwriters to immediately make accessible the identities of the major investors to whom IPO shares were allocated and the number of shares allocated.
Open up net roadshows and conference calls to all investors.
Require companies to immediately publish transcripts of net roadshows and conference calls.
Make the SEC web site more user friendly, such as allowing for key word searching of documents.
When SEC documents are amended, highlight in black line, the changes made in every amendment, particularly the changes from the red herring to the final prospectus.
When insiders sell shares, require immediate reporting of the insider's name, title, total shares held along with comprehensive disclosure of the latest holdings of all the insiders.
Extend the safe harbor of "fair disclosure" of earnings guidance to companies in registration to go public.
Require foreign issuers to make all filings electronically, not in paper form, and to file quarterly, not every six months.
Require the IPO prospectus to list the identity of sellers in the overallotment option.
Require the IPO prospectus to disclose quarterly results for the past year.