Companies considering going public will now be able to test the waters under an accommodation that until now has only been available to emerging growth companies, the Securities and Exchange Commission said Thursday.
The new rule extends the "test-the-waters" accommodation to all issuers, allowing them to now communicate with institutional investors to gauge market interest in a possible initial public offering or other registered securities offering.
"Investors and companies alike will benefit from test-the-waters communications, including increasing the likelihood of successful public securities offerings," said SEC Chairman Jay Clayton, who has been concerned about encouraging more companies to enter public markets as those offerings are now outnumbered by private ones.
The rule will become effective 60 days after publication in the Federal Register.
Emerging growth companies have had the communication protection since 2012, when Congress passed the Jumpstart Our Business Startups Act to allow the firms to engage in test-the-waters communications with qualified institutional buyers and institutional accredited investors before or after the filing of a registration statement related to such offering.