Does the Confidential IPO Registration Process Create Value?

Posted: 14 Nov 2021 Last revised: 28 Mar 2022

Date Written: December 28, 2021


This paper studies the confidential IPO registration process adopted by 86% of firms since the JOBS Act of 2012. Using textual analysis, I investigate the changes in information content between draft registration statements (Form DRS) and corresponding formal prospectus (Form S-1). I show that valuable information is produced during the confidential review process between the firm and SEC. I construct a novel proxy for the content of SEC comment letters before their release, which leads to a 4.5% cumulative abnormal return. I find that changes in the proportion of positive words are strongly associated with operating performance, reflecting the fundamental value of offerings. Moreover, changes in word content indicate changes in the firm’s information environment that can further explain offer price adjustment and underpricing. Lastly, the evidence suggests that the confidential review process significantly improved disclosure transparency, while the SEC has remained neutral in the firm’s withdrawal decision.

Keywords: IPOs, JOBS Act, Draft Registration Statement, Textual Analysis

JEL Classification: G14, G18, G24

Suggested Citation

Zhu, Mengnan, Does the Confidential IPO Registration Process Create Value? (December 28, 2021). Available at SSRN: or

Mengnan Zhu (Contact Author)

Brandeis University ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

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