Stephan Paternot and Todd Krizelman are frustrated.
It was bad enough that they had to postpone the initial stock offering of the community site company they co-founded, theglobe.com. But what's really grating is that they're not allowed to explain why the company is still worth watching. Nope, not a word.
That's because the company is still technically in the quiet period, a nebulous Securities and Exchange Commission restriction that prevents companies from speaking freely to the public while registered to sell shares. The shroud of silence also covers the month or so before the registration is filed.
Theglobe.com entered the quiet period in June. Until the company either goes public or pulls the registration statement it spent a fortune in time and money to put together, it will have to remain mute.
Meanwhile, competitors like GeoCities (GCTY) are merrily trumpeting the virtues of their services. Net years are streaking by.
"With Internet companies, part of the business is to build your brand as fast as possible," says Paternot. "But if you're in a quiet period for months, you can't tell people about your business. You're at a disadvantage for the entire period. It's definitely impacted our business."
Paternot isn't the only person complaining about the quiet period. Investors big and small wonder why a company would have to shut itself off from the world at a time when the world most wants access.
In an era when PC-equipped investors are making decisions without a broker, the SEC regulations that created the quiet period -- originally crafted to protect investors from speculative hype -- actually may be hurting investors by hindering the flow of information out of the company.
The quiet period is, at best, an anachronism in an age of conference calls, streaming media and investment chat boards. At worst, the quiet period is a weapon wielded by corporate lawyers and investment bankers to dole vital information to favored clients. "To suggest to somebody that they can't conduct their business for some period of time doesn't make sense," says Steven Wallman, a former SEC commissioner. "The whole concept of the pristine waiting and quiet period doesn't exist anymore, and can't."
