Preparing for success: 2013 technology IPO SEC comment letter trends

November 2013
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Preparing for success: 2013 technology IPO SEC comment letter trends

At a glance

PwC’s technology industry publication, Preparing for success: 2013 technology IPO SEC comment letter trends, highlights trends in SEC staff comment letters specific to technology companies filing their IPO registration statements.

We have analyzed over 4,100 comments issued by the SEC staff from January 1, 2011 to March 31, 2013 to 60 companies in the following subsectors: computers and networking, semiconductors, and software and internet. While some comments are subsector specific, others are applicable to all IPO filers in the technology space. We have captured the areas that received the most comments from the SEC and provided examples of actual comments.

Click to see SEC staff comments by topical area

We hope that an understanding of these trends, along with specific examples of comments, will provide you with helpful insights and aid in your production of high-quality registration statements.

Click on the headings below to explore highlights of the publication.

 

IPO activity resurgence, reminiscent of the dot-com era

A year after the Jumpstart Our Business Startups (JOBS) Act was signed into law and a new type of filer, the Emerging Growth Company (EGC), was introduced, the technology industry led the way with more than a quarter of all publicly filed EGC IPOs. We have analyzed how companies have decided to adopt the different scaled disclosures and other accommodations of Title I of the JOBS Act. Additionally, we have summarized data about the duration of the comment letter process, including the average number of rounds of comments and the average number of comments per round.

Cheap stock questions dominate

Cheap stock and the valuation of stock-based compensation questions continue to dominate in the IPO environment with the SEC looking for a clear understanding of any changes in the company’s valuation for at east a year prior to the offering. The SEC staff expect to see transparent discussion of any significant changes in the business that may impact a company's enterprise value.

Revenue recognition at the heart of technology companies’ financial statements

Revenue recognition for technology companies is an area with many complexities and judgment. Depending on the company's business model, we have seen several key themes ranging from software revenue recognition matters to multiple-element arrangements, as well as gross vs. net revenue presentations and reseller arrangements.