'Cooling Off' After <I>Times</I> Article

In an SEC filing, the firm contests 'any claim that a violation of the Securities Act occurred.'
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Updated from 5:26 p.m. EDT offered new details Friday about regulators' concerns over comments from CEO Marc Benioff. The company wants to defuse potential criticism that Benioff has touted its stock in advance of its upcoming IPO.

The trouble stems from a story profiling Salesforce that appeared in

The New York Times

on May 9, a story for which Benioff allowed a reporter to follow him for most of the day. Four days later, Salesforce said it had temporarily shelved its IPO, though executives declined to give a reason.

In a Friday filing with the

Securities and Exchange Commission

, however, Salesforce suggested that the delay had occurred because the article had "presented statements about our company in isolation and did not disclose many of the related risks and uncertainties" described in the prospectus. The company said it held off on its IPO to allow a "cooling off" period so that investors would rely less on the



An analyst at Renaissance Capital, Kathleen Smith, noted at the time that the offending article revealed that CEO Marc Benioff and other insiders

had sold millions of shares in, a fact that was left out of the prospectus because it occurred some time ago.

John Gavin, president of the research firm SEC Insight, said on Friday he'd like to know whether Salesforce is also being investigated for reasons not mentioned in the latest filing. At times, he said, companies will hint that regulators are scrutinizing one area of their businesses, but investors will later realize it was only one of many areas under investigation.

"One of our ongoing disappointments with the SEC is that companies can be under investigation and not required to disclose it, or even if they do disclose it, they may not disclose the nature of the investigation or details," he said.

For its part, Salesforce said in its filing that it will "contest vigorously any claim that a violation of the Securities Act occurred."

Under federal law, companies aren't allowed to sell stock until their registration statement has passed muster with the SEC. If the registration hasn't gone into effect, they can get in trouble for seemingly mundane activities that could be construed as touting their stock, like issuing a press release or allowing interviews with their executives.

In such cases investors who bought the stock have a "rescission right," meaning they can sell the shares back to the company (since the investors presumably bought the stock without fully understanding its inherent risks). In the "risks" section of its prospectus filed on Friday, Salesforce cautioned that if it were found to have violated the law, it might be required to repurchase shares sold in its IPO at the original purchase price, for up to a year following the date of the violation.

But the risk of the potential buyback flagged by Salesforce, which hasn't debuted on the public markets yet, is "pretty darn unlikely," said Jerry Isenberg, a partner in the law firm of LeClair Ryan. It's "conceivable" that an investor who bought stock based on the


article could have a rescission right, Isenberg said. But he characterized the updated filing as a "cautious disclosure" rather than something that's likely to actually come to pass.

According to Friday's SEC filing, Salesforce still aims to sell 10 million shares of stock priced at $7.50 to $8.50 a share in a listing on the

New York Stock Exchange