The “Quiet Period” Myth

It is still somewhat surprising to me how few critics there are of the SEC-mandated “quiet period” in the leadup to IPOs. If nothing else, one good thing that could come out of the mass confusion surrounding the Google IPO is an overdue rethink of the whole idea of pre-IPO quiet periods.

Because forcing issuing companies to stay publicly silent in the run-up to their IPO doesn’t mean they actually stay silent. No, it merely means that they don’t talk to the media and they don’t, therefore, talk to small investors. As part of the road show promoting the offering they talk freely (in private meetings) with big investors.

Such is the essential perversity of the quiet period, doubly so in the Google offering. Because despite having created an offering that has appeal to (some) retail investors, the quiet period rules ensure that Google can’t deal with the many issues and questions that arise from such an unusual IPO. Making things worse is that there is little incentive for the underwriters, institutional investors, and technology industry sorts to carry Google’s water: they all wouldn’t be unhappy if this unorthodox offering failed.