SEC shortens tender offer windows for certain offerings

Conditions

For reporting companies under the Exchange Act conducting a tender offer, the Relief permits a shortened 10 day offering period if certain conditions are met. The notable conditions include: 

• Equity Securities: The Relief is only available for a tender offer involving a class of equity securities.
• Amount of the Class Offered: The offer must be made for less than all of the outstanding securities of the subject class.
• Cash Only Consideration: The consideration offered for the subject securities can only consist of cash at a fixed price.
• No Other Outstanding Tender Offers: At the time of public announcement of the tender offer in reliance on the Relief, the subject securities may not be the subject of a previously announced or pending tender offer by another offeror. 
• Required Extension: If another tender offer for the same subject securities is publicly announced following the commencement of a tender offer made in reliance on the Relief, then the initial tender offer must be extended to be open for at least 20 business days from the date the offer commenced. 
• Public Announcement: The commencement of the tender offer must be announced in a press release or other public announcement, and any material changes to the terms of the offer (e.g., changes to the amount of securities sought in the offer or changes in the consideration being offered) must be announced publicly in a similar manner. The public announcement must contain the basic terms of the tender offer, as well as an active hyperlink to a website address where security holders may access any other documents relating to the offer.

The Relief also permits a shortened offering period for non-reporting companies conducting tender offers pursuant to Rule 14e-1 under the Exchange Act. Non-reporting companies are subject to fewer conditions, but notably are still subject to the requirements that the offer can only involve equity securities, that the consideration paid is cash at a fixed price, and that the commencement and any material amendments are announced publicly. 

Considerations and Key Takeaways

In evaluating whether to utilize the Relief, companies should weigh the following considerations: 

Market Fluctuations: By enabling the use of a shorter offering period, the Relief will allow companies to provide investors with more immediate liquidity that is responsive to market fluctuations, investor demand, and actual or perceived changes in the value of subject securities, especially with respect to illiquid and semi-liquid securities. Notably, the Relief is being issued among a backdrop of increased demand for redemptions of illiquid and semi-liquid securities, where issuers not listed on a national securities exchange generally provide liquidity to investors through tender offers on a quarterly basis. 

Cash Only Consideration: Companies should consider the type of consideration to be paid, particularly if they have historically conducted periodic tender offers with a forward pricing mechanism or form of compensation that may not be considered “fixed” under relevant SEC guidance. 

Public Announcement and Reduced Costs: The requirement to publicly announce a tender offer relying on the Relief notably omits the condition under the tender offer rules that materials must be mailed to all holders of the subject security, which can lead to significant costs. Accordingly, reliance on the Relief may reduce mailing costs for companies by removing the requirement to mail materials to investors. The Relief does not eliminate the requirement to file a Schedule TO or to otherwise comply with the applicable tender offer rules. 

Coordination and Timing: Companies will need to consider the impact of shorter offering periods on their operations, including coordinating tender offer timelines with other corporate obligations, public filings, or securities offerings. 

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