If you do, you invite the wrath of the Securities and Exchange Commission, the regulatory agency that enforces securities law. This week, Webvan Group Inc. got caught. In IPO land, delay is often the kiss of death for a new issue. The rationale is to protect unsuspecting investors from companies that might hype their stock. It's an exercise, in part, to see how much interest there is in the stock.
Companies often readjust their offering price once they get a sense of the stock's demand.
During the road show, company executives are legally supposed to parrot the information in the prospectus, the official SEC-approved document detailing the company's financial history, its business strategy and the risks of investing in it. The SEC frowns on this selective disclosure but has typically turned a blind eye to the practice, either because it rarely catches companies in the act or because it believes institutional investors are more capable of sifting fact from exaggeration. Given these restraints, companies sometimes complain they are in a bind between giving accurate information about new products or new deals and avoiding the appearance of hype. The SEC, on the other hand, is concerned that companies may time the announcement of new products or partnerships to fuel the demand for the stock. In Webvan's case, too much publicity was too much of a good thing.