Speaking at Stanford, Chair White addressed a broad range of issues affecting the technology sector, including the decision on the part of many privately held companies to defer their IPOs, to rely on exempt offerings to raise capital, and to rely on private secondary markets to create liquidity opportunities for existing stockholders.
Chair White commented on the quality of the disclosures made by pre-IPO companies that engage in financings. She pointed to financings involving unicorns. Citing recent statistics, she noted a survey shows that there were 52 unicorn financings in the last three quarters of 2015 compared to 37 such financings over the 12 months that ended in March 2015. She noted that from the SEC's perspective, there were areas of concern, including "whether the information supplied to investors is accurate and complete – that is, whether it accurately reflects the performance and prospects of the company." Chair White emphasized that Exchange Act Section 10(b) and Rule 10b-5 apply to all companies. Finally, she discussed the possibility that the publicity surrounding unicorns and their valuations brought with it the possibility of distorting investor decisions. She cautioned vigilance by private companies about the accuracy of their financial results and other disclosures.
Along these lines, she noted that the valuation of many privately held companies now exceeds those of reporting companies however many of these companies do not have in place appropriate corporate governance and financial reporting controls. As companies defer their IPOs, they also appear to be deferring putting in place the types of governance and reporting controls associated with public companies.
Chair White noted that the SEC also is focused on secondary private markets and some of the issues that have been identified, such as unregistered broker-dealer activity, conflicts of interest and undisclosed compensation, and fraudulent offers of pooled investment vehicles that purported to hold pre-IPO stock. She also raised concerns about liquidity and the role of gatekeepers for these markets.
The full text of the remarks, which also touch on various fintech matters, may be found here: https://www.sec.gov/news/speech/chair-white-silicon-valley-initiative-3-31-16.html.
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