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Public Offerings
1. What's a Public Offering?
2. Who is This Good For?
3. When is This the Best Choice for
Me?
4. When is This Not Advised?
5. Tips for Getting The Money.
6. Ingredients You'll Need on
Hand.
7. Watch Out For...
8. Web Links.
1. What is a Public Offering?
Selling shares of your company to the public, in the form of stock.
This is a good way to raise a lot of money -- perhaps tens of millions
-- but it opens you up to intense scrutiny, first from the Securities
and Exchange Commission, state regulators, and then from the financing
community, such as brokerage houses. Once you are a publicly-traded
company, your financial situation and many of your internal operations
become public knowledge. You will also be required to make regular
reports to your shareholders and to the securities regulators. An
initial public offering or IPO is the first time a company sells
its shares to the public.
2. Who is This Good For?
Companies with a well-established track record that are looking
for at least $5 million to invest in the next round of product development,
marketing, and expansion.
Some high-tech startup companies, especially in the internet field,
have managed to go public on the strength of their concepts and
business plans, even before establishing a solid track record, however,
this is unusual.
Small Corporate
Offering Registrations allow smaller companies to raise less
than $5 million with fewer regulations.
3. When is This the Best Choice for Me
When your company has reached a fairly high level of success and
you need a major infusion of capital to get to the next level;
When you have good, strong financial performance.
4. When is This Not Advised?
If your company is new.
If your company's performance is likely to result in the public
market being unresponsive to investing, or investing at such a low
price that it actually makes the value of your company less than
it would be if funded through other sources.
When you're unwilling to have the ongoing public scrutiny and
regulation that a public company entails.
5. Tips for Getting The Money
Try to get some publicity about your company while it's still
private. You'll be prohibited by law from flogging your story immediately
before a public offering
Have an auditor -- preferably from one of the top big accounting
firms -- go through your financials to make sure that they're in
perfect order before you invite in the investment bankers.
6. Ingredients You'll Need on Hand
- A good securities attorney who is familiar with public offerings.
- A top accounting firm and complete, audited, financials.
- An investment banking firm.
- A hefty budget, perhaps as much as $500,000 to $1 million.
Those advisors are expensive.
- A well-qualified Board of Directors and senior management in
place.
- An Offering Memorandum.
- A good supply of antacid. Going public will give you heartburn,
both during the process, and every quarter when you have to prepare
your reports for the SEC.
7. Watch Out For...
Fees. Investment bankers typically get a fee equal to a
percentage of the deal (often 3%) plus additional up-front fees.
Plus, you'll also need a platoon of lawyers, accountants, printers,
consultants.
The spotlight. You'll likely enjoy a burst of media publicity
when your company's IPO hits the market. Can you stand the heat?
Distraction. Going public requires a lot of meetings, paperwork
and filings, then cooperation with the investment bankers as they
do their due diligence. Who's minding the store?
8. Web Links
Small Corporate
Offering Registration Network
SEC regulations, links to detailed venture capital information
and software packages you can download. Links to related services
like attorneys, brokers, and a bulletin board for posting your situation
in hopes of finding an investor or two.
IPOnet
Designed for investors looking to invest at least $410,000.
Lists companies going public, with their prospectuses.
Venture Associates
Ltd.
A Denver financial consulting firm run by James Arkebauer.
Information on going public, as well as finding angels, venture
capital, investment bankers, management consultants and more.
Securities and
Exchange Commission
Rules, regs, offerings, filings of public companies.
Venture Capital
Resource Library
Includes addresses of state regulators and district offices
of the SEC, as well as information on securities law.
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