We’re not saying that we are the final word on the legal intricacies of going public, and the rules therein, but it looks like Facebook broke no law by announcing its acquisition of Instagram during its quiet period.
A company that is going public, after filing, has to endure a protracted period of silence. This prevents the company from hyping its own offering. This period is called the ‘quiet period,’ or the ‘cooling off period.’ The SEC outlines the general idea of the quiet period in the following way:
“The federal securities laws do not define the term “quiet period,” which is also referred to as the “waiting period.” However, a quiet period extends from the time a company files a registration statement with the SEC until SEC staff declare the registration statement “effective.” During that period, the federal securities laws limit what information a company and related parties can release to the public. The failure to comply with these restrictions generally is referred to as ‘gun-jumping.'”
What are these limited statements [Bold: TNW]?
Communications by issuers more than 30 days before filing a registration statement will be permitted so long as they do not reference a securities offering that is the subject of a registration statement.
Expressly allowed, however, are other statements:
All reporting issuers are, at any time, permitted to continue to publish regularly released factual business information and forward-looking information.
The Instagram purchase falls under that rule, in our estimation. The company will likely now amend its S-1 form to reflect its purchase.
I know that you probably didn’t think that Facebook would do anything to jeopardize its massive forthcoming IPO, but now you can be confident that in this case, the company is utterly kosher. Off to Wall Street with you, Facebook.