Offering Price & Dilution Disclosures in Registration Statements

Securities Lawyer 101 - Form S-1T oxic Financing, Toxic Convertible Note, Toxic funding, Convertible Note Lender, Toxic Financings

Securities Lawyer 101 Blog

Companies going public have several options in how to structure their transaction when filing a Form S-1 registration statement.

The issuer can seek to raise capital by registering shares to sell through an Initial Public or Direct Public Offering,  it may register shares on behalf of existing shareholders or it can do both.

If the issuer seeks to raise capital using a registration statement it must disclose the criteria it used, if any, to arrive at the offering price.

If the issuer arbitrarily determined the offering price and no specific criteria was used in pricing the offering, this should be disclosed along with specific risk disclosures.

Some of the factors an issuer might consider in pricing an offering include:

• Current trading price
• Net tangible book value per share
• earnings per share
• Stock prices of similar companies
• Recent private stock sale prices
• The price investors are willing to pay for the shares
• Funds needed to fund operations
• Funds needed to expand operations or acquire assets

Dilution Disclosures in Form S-1 Registration Statements

The dilution to existing stockholders must be disclosed if an issuer is seeking to sell shares.  To calculate dilution, the issuer must determine its current net tangible value per share, (value of all assets on the balance sheet less liabilities and all intangible assets).  Tangible assets include formation costs and any patents, copyrights, franchises, trademarks, operating rights, and goodwill. Tangible book value is determined using the issuer’s most recent balance sheet.

To compute the net tangible book value per share, the total number of outstanding shares before the offering is divided by the net tangible book reflected on the most recent balance sheet.   In calculating the outstanding shares,  the issuer must include all shares issued and outstanding including any shares issued after the period of the last balance sheet through the time of the offering.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855