SEC Pulse Header NEW-1

SEC Publishes Sample Comments re: Stock Price Volatility

Posted by Howard Berkenblit on February 9, 2021 at 10:22 AM
Find me on:

The SEC’s Division of Corporation Finance published an "illustrative letter" with sample comments that it may issue to companies seeking to raise capital in securities offerings amid market and price volatility. These will most often apply to companies with (1) recent stock run-ups or recent divergences in valuation ratios relative to those seen during traditional markets, (2) high short interest or reported short squeezes, and (3) reports of strong and atypical retail investor interest (whether on social media or otherwise). However, all companies should review this new guidance as part of their preparations for any upcoming capital raising.

https://www.sec.gov/corpfin/sample-letter-securities-offerings-during-extreme-price-volatility

The sample comments generally call for increased disclosures about:

  • recent price volatility and any known risks of investing in the stock under these circumstances.
  • the market price of the stock prior to the recent price volatility.
  • any recent change in financial condition or results of operations, such as in earnings, revenues or other measure of company value that is consistent with the recent change in stock price. 
  • risk factors addressing the recent extreme volatility in stock price, the effects of a potential "short squeeze" due to a sudden increase in demand for the stock, the impact that the offering could have on the stock price and on investors where there is a significant number of shares being offered relative to the number currently outstanding and, to the extent the company expects to conduct additional offerings in the future to fund its operations or provide liquidity, the dilutive impact of those offerings on investors that purchase shares in the offering at a significantly higher price.
  • various impacts of the sales price on the use of proceeds.

Topics: Securities and Exchange Commission, Stock price volatility

Sullivan 4c

About the Blog


The SEC Pulse provides updates and commentary from our Capital Markets Group on issues affecting publicly traded and privately owned businesses, investment banks and foreign companies who trade or raise capital in the United States, and boards of directors and company officers in securities transactions and corporate governance matters.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

Subscribe to Blog

Recent Posts

Posts by Topic

see all