Investor Wall-Crossing Script and E-mail Confirmations

Summary

This template script may be used by investment banking personnel in initial conversations with prospective investors for a “wall-crossed” offering. This template includes practical guidance and drafting notes. In a wall-crossed offering, the underwriters (or placement agents) confidentially provide a small number of prospective investors (e.g., institutional investors such as hedge funds, mutual funds, and private equity funds, as well as an issuer’s principal shareholders), with information about a proposed offering. This enables the issuer and the underwriter to gauge investor interest in an offering before it is publicly announced and marketed, and thus limits the issuer’s risk of having to withdraw an announced offering due to insufficient investor interest. Since a contemplated securities offering in itself may constitute material nonpublic information about the issuer, underwriters typically follow these conversations with an email confirming the investor’s agreement to keep the information confidential. The confirming email may either be one-way or require an email response from the investor. On September 26, 2019, the Securities and Exchange Commission (SEC) extended the ability to test-the-waters to all issuers by adopting the highly anticipated new Rule 163B under the Securities Act of 1933, as amended. This rule allows any issuer, or any person acting on the issuer’s behalf, to engage in test-the-waters communications with potential investors that are reasonably believed to be institutional accredited investors or qualified institutional buyers, either prior to or following the date of filing of a registration statement relating to the offering, without violating the Securities Act’s “gun jumping” rules. Prior to Rule 163B, the ability to test the waters was limited to emerging growth companies (EGCs) only. For further information on new Rule 163B, see SEC Adopts Rule Allowing All Issuers to “Test the Waters”: Client Alert Digest. Issuers that previously would have relied on wall-crossed offerings may instead choose to rely on Rule 163B. For a discussion of follow-on offerings, see Registered Securities Offerings Post-IPO and Follow-On Offerings Resource Kit.