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Initial Public Offerings (IPOs)

SEC Advisory Committee On Small And Emerging Companies Explores Venture Exchanges, Private And Secondary Securities Trading and The NASAA Coordinated Review Program- Part I

The SEC Advisory Committee on Small and Emerging Companies (the “Advisory Committee”) was organized by the SEC to provide advice on SEC rules, regulations and policies regarding “its mission of protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation” as related to “(i) capital raising by emerging privately held small businesses and publicly traded companies with less than $250 million in public market capitalization; (ii) trading in the securities of such businesses and companies; and (iii) public reporting and corporate governance requirements to which such businesses and companies are subject.”

As previously written about, on March 4, 2015, the committee met and finalized its recommendation to the SEC regarding the definition of “accredited investor.”  My blog on those recommendations can be read HERE.  In addition to finalizing the accredited investor definition recommendation, at the March 4 meeting the Advisory Committee listened to presentations regarding and discussed several important and timely small business initiatives.

I’ve had the

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May 5, 2015

Corporate Communications During the Public Offering Process; Avoid Gun Jumping

The public offering process is divided into three periods: (1) the quiet or pre-filing period, (2) the waiting or pre-effective period, and (3) the post-effective period.  Communications made by the company during any of these three periods may, depending on the mode and content, result in violations of Section 5 of the Securities Act of 1933 (the “Securities Act”).  Communication related violations of Section 5 are often referred to as “gun jumping.”  All forms of communication could create “gun jumping” issues (e.g., press releases, interviews, and use of social media).  “Gun jumping” refers to written or oral offers of securities made before the filing of the registration statement and written offers made after the filing of the registration statement other than by means of a prospectus that meet the requirements of Section 10 of the Securities Act, a free writing prospectus or a communication falling within one of the several safe harbors from the gun-jumping provisions.

Section 5(a) of

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August 12, 2014

COMPREHENSIVE REVIEW OF TITLE I OF THE JOBS ACT AS RELATED TO EMERGING GROWTH COMPANIES

On April 5, 2012, President Obama signed the Jumpstart our Business Startups Act (JOBS Act) into law.  The JOBS Act was passed on a bipartisan basis by overwhelming majorities in the House and Senate.  The Act seeks to remove impediments to raising capital for emerging growth public companies by relaxing disclosure, governance and accounting requirements, easing the restrictions on analyst communications and analyst participation in the public offering process, and permitting companies to “test the waters” for public offerings.   The following is an in-depth review of Title I of the JOBS Act related to Emerging Growth Companies.

Introduction – What is an Emerging Growth Company?

The JOBS Act created a new category of company: an “Emerging Growth Company” (EGC).  An EGC is defined as a company with annual gross revenues of less than $1 billion that first sells equity in a registered offering after December 8, 2011.  In addition, an EGC loses its EGC status on the earlier

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November 14, 2012

Crowdfunding Direct Public Offerings

Background:

As a reminder, on April 5, 2012 President Obama signed the JOBS Act into law. Part of the JOBS Act is the Crowdfunding Act, the full title of which is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012”. The Crowdfunding Act creates a new exemption to the registration requirements under a newly designated Section 4(6) of the Securities Act of 1933, as amended.  Although the Crowdfunding Act is, by definition, an exemption from the registration requirements and therefore a new form of private placement, innovative and forward thinking minds have already come up with a method of utilizing the crowdfunding methodology for a public, registered offering.

What is a crowdfunding registered offering:

A crowdfunding registered offering is a combination of direct public offering (DPO) and initial public offering (IPO).  As I have blogged about in the past, a DPO is like an IPO except the Issuing Company does not use an underwriter to

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August 21, 2012

Q2 By The Numbers – An Analysis of Market

First, I’d like to give credit to The DealFlow Report which was my initial source for the numerical factual information in this blog.

 

The Numbers and Facts

Q2 reflects the uncertainty that goes along with an election year and the concerns over tax increases (or decreases) that go along with election years.  There also remains the ongoing worry over European markets.  In short, it is a time of change and uncertainty.  Moreover, according to Adam Lyon, a managing director and co-head of private capital at Conaccord Genuity, the small cap financing market, “is probably in for the usual seasonal fluctuations: a tough summer followed by a pick-up in late August and September.”  I note that my law firm has seen this trend consistently for the past decade.

According to data from Dealogic, the number of IPO’s dropped by 41.4% in Q2, however, mainly as a result of the facebook IPO, the dollar value of those IPO’s rose by 56.4%. 

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July 24, 2012

The JOBS Act IPO On-Ramp

I’ve written extensively on the Crowdfunding Act, or Title III of the Jobs Act, and much less extensively on the other five titles of the Act.  Today’s blog will focus on Title I of the Jobs Act – Reopening American Capital Markets to Emerging Growth Companies.  Several industry types have been referring to Title I as the IPO On Ramp and so will I.

The Jobs Act

The JOBS Act created a new category of companies defined as “Emerging Growth Companies” (EGC).  An EGC is defined as a company with annual gross revenues of less than $1 billion that first sells equity in a registered offering after December 8, 2011.  In addition, an EGC loses its EGC status on the earlier of (i) the last day of the fiscal year in which it exceeds $1 billion in revenues; (ii) the last day of the fiscal year following the fifth year after its IPO; (iii) the date on which it

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June 4, 2012

Crowdfunding 101

As I recently blogged, the President has signed the Jobs Act including the much anticipated Crowdfunding bill.  Crowdfunding is a process whereby companies will be able to raise small amounts of money either directly off their own website or using intermediaries set up for the purpose.  The Securities Act of 1933, as amended, (Securities Act) prohibits the sale or delivery of any security unless such security is either registered or exempt from registration.  Crowdfunding will be an exemption from registration.  The exemption will likely be codified as a new and separate exemption likely under Regulation D and will include an overhaul of the current general provisions of Regulation D found in Rules 501-503.

Crowdfunding Exemption Possibilities

 

The exemption will likely be limited to $1 million in any twelve (12) month period, or up to $2 million if the company provides certain financial disclosure such as audited financial statements.  As proposed, each investor will be limited $10,000 or 10%

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April 16, 2012

Gunjumping Restrictions On Communications Related To IPOs

”Gunjumping” is the dissemination of information regarding the Issuer before a complete prospectus has been filed with the Securities and Exchange Commission (“SEC”). Communications prior, during and immediately following the filing of a registration statement are strictly regulated to prevent an Issuer from hyping the market in association with an offering. In addition, the SEC wants to ensure that investors decisions to participate in an offering are based on information that has been reviewed by the SEC and meets the disclosure standards set forth in the securities laws.

Registration Requirements for Sales

During the pre-filing period, Section 5(c) of the Securities Act of 1933, as amended (the “Securities Act”) makes it “unlawful for any person, directly or indirectly, to… offer to sell or offer to buy… any security, unless a registration statement has been filed as to such security.” An offer to sell or offer to buy are broadly defined to include every attempt or offer to dispose of a

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February 25, 2011

Back To Basics – IPO Or Not To IPO?

Initial Public Offerings (IPO’s) are on the rise once again. I have potential clients calling me daily interested in going public through an IPO, most have little or no prior knowledge of the public company arena – so back to basics. An IPO is an initial public offering of securities. Prior to proceeding with an IPO, an Issuer should consider the advantages, disadvantages and alternatives.

The advantages of an IPO include:

  • Access to capital
  • Liquidity of stock
  • Public image and prestige; and
  • Ability to attract and retain better personnel

The disadvantages of an IPO include:

  • Expense – both of the initial transaction and ongoing compliance;
  • Public disclosure of business information – public companies are required to be transparent which can give private competitors an edge;
  • Limitations on long term strategic decisions
  • Civil and criminal liability of executive officers and directors; and
  • Takeover danger

The alternatives to an IPO for an Issuer seeking capital include:

  • A Section 4(2) and/or Regulation D
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February 23, 2011

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