New Act Opens 'Testing the Waters' to All Companies, Streamlining IPOs and Giving the SEC New Powers

The “Encouraging Public Offerings Act of 2025” is a piece of legislation focused squarely on making it easier and faster for companies—especially large, established ones—to go public or raise more money once they’re already listed. Think of it as updating the playbook for Initial Public Offerings (IPOs) and follow-on offerings, essentially rolling out red carpet treatment that was previously reserved for smaller, newer companies.

The All-Access Pass to Talking Shop

Previously, only “Emerging Growth Companies” (EGCs)—smaller firms with less than $1.235 billion in annual gross revenues—could legally “test the waters.” This meant they could talk to qualified institutional buyers and certain investors about a potential offering before filing all the official paperwork with the Securities and Exchange Commission (SEC). Section 2 of this new Act changes that, extending the “testing the waters” provision to all issuers. Now, massive, established companies looking to go public can also have these preliminary, confidential conversations with big investors to gauge interest and pricing before making a formal public commitment.

For the average person, this means that the biggest companies looking to debut on the stock market can now conduct market research in private before you ever hear about their IPO. The bill grants the SEC the authority to create new rules for these non-EGC companies using this expanded power, but only after they send a report to Congress explaining why those rules are necessary. This creates a regulatory gap: for now, the playing field is wide open, but the specific guardrails for these larger companies are still TBD. It’s a classic move: open the door first, figure out the safety latch later.

Confidentiality for Everyone (With a Catch)

Section 3 addresses the process of submitting paperwork to the SEC. Right now, companies can submit a draft registration statement to the SEC staff for review confidentially, meaning the public doesn't see the paperwork until much later. This Act expands that confidential review process to any company planning an IPO, an initial listing on an exchange, or a follow-on offering (when a company that’s already public issues more stock).

This is a huge procedural streamlining step for corporate finance teams. However, the confidentiality doesn't last forever. The company must publicly file that draft, along with any amendments, before the offering goes live. For IPOs and initial exchange listings, they must be made public at least 10 days before the effective date. But for a follow-on offering—when a public company raises more capital—the public filing only needs to happen 48 hours before the registration statement becomes effective. That 48-hour window is pretty tight and doesn't leave much time for public scrutiny compared to the 10-day requirement for a brand-new IPO. For investors, this means less time to review the details of a follow-on offering that could dilute the value of their existing shares.

The Bottom Line: Speed and Uncertainty

This Act is clearly designed to speed up the capital-raising process by reducing regulatory friction for all companies, not just the small ones. It benefits corporate finance teams and investment banks by giving them more flexibility and privacy during the sensitive pre-IPO phase. However, it also introduces a layer of regulatory uncertainty. By expanding these communication and confidentiality privileges to massive companies while giving the SEC the power to create future specific rules for them—and forcing the SEC to report to Congress first—the bill essentially defers the key regulatory decisions. Until the SEC acts, the rules of the road for these larger, more complex offerings remain somewhat undefined, which could leave potential investors relying on less-vetted information during the expanded “testing the waters” period.