Sebi planning to allow confidential pre-filing of IPO documents
- ByStartupStory | September 29, 2022
The Securities and Exchange Board of India (Sebi) is planning to relax open offer pricing rules for the disinvestment of public sector undertakings (PSUs), allow companies holding initial public offerings (IPOs) to submit confidential pre-filing of offer documents, and request enhanced disclosures from startups in offer documents on the IPO issue price.
The regulator’s board will vote on a proposal to include buying and selling by mutual funds under insider trading regulations at its meeting on September 30. Currently, they are not. The action follows the Franklin Templeton incident, in which a few executives were charged with insider trading.
Pre-filing
Having pre-filed offer documents with Sebi and exchanges simply requires companies to publicly declare it. Additionally, the issuing business will need to clarify that pre-filing does not guarantee an IPO.
Significant for New-age Cos
Mehul Savla, a partner at RippleWave Equity Advisors, stated that the method of pre-filing or confidential filing is a well-established notion in the US. “The SEC (the US Securities and Exchange Commission) implemented this in 2012 to encourage IPOs by developing growth companies. All businesses in 2017 were given the same opportunity, and businesses like Airbnb and Uber took advantage of it. The UK and Canada are two other countries that allow the pre-filing of offer documents for regulator assessment in addition to the US.
In order to safeguard the security of financial and operational data in a competitive market, Savla remarked, “The action by Sebi is quite progressive and will be particularly favourable to new-age, high-growth enterprises.” The public notice time should be shortened from 21 days to two weeks in order to increase the effectiveness of the process.
In contrast to more established businesses with stable sales and profits, high-growth businesses will benefit significantly from a few months of data secrecy.
PSU pricing
The regulator’s board may also accept a request to relax several takeover code requirements for PSU disinvestment. In order to calculate the open offer price for the disinvestment of PSUs and for the indirect acquisition of any other company in which the PSU has a share, it will no longer be necessary to take into consideration the 60-day, volume-weighted average market price.
The regulator had stated that after receiving cabinet clearance, information on strategic disinvestment becomes public and further announcements are made at various times, impacting the market price of the PSU in question.
The PSU divestiture process already relies on competitive bidding, which guarantees the best price for all shareholders and guarantees that even minority owners’ interests are sufficiently protected, according to Savla. The elimination of offer price requirements that are linked to the market would lead to more participation and, ultimately, improved price discovery.
Follow Startup Story
Related Posts
