Going Public and Raising Capital 101 – Securities Lawyer 101
A private or public company can raise capital in a variety of ways. Traditional sources of capital for companies include loans from financial institutions such as a bank, or from friends and family as well as receivable financing. Companies can also raise capital in going public transactions by selling their securities prior to filing a Form S-1 SEC registration or Regulation A+ Offering Circular. Going public is a milestone for any company and there are both advantages and disadvantages that attach to public company status. Companies going public do so because of the general perception that their new status will make it easier to raise capital.
If a private or public company is offering and selling securities, even if to only one person, the offer and sale of the securities must either be registered with the Securities and Exchange Commission (“SEC”) or must qualify for an exemption from the registration statements requirements of the Securities Act of 1933, as amended (the “Securities Act”).
Advantages of Public Company Status
There are numerous advantages of public company status including:
♦ Public companies can increase liquidity for the private company’s stock, which may allow the owners and employees who receive stock through an employee benefits program to sell their stock more easily;
♦ Public companies are able to acquire other businesses with their securities;
♦ Public companies can attract and compensate management and other employees with their stock and stock-options; and
♦ Being public can create brand awareness, publicity and prestige for the private company.
Raising Capital by Selling Stock
♦ Increased liabilities resulting from public disclosures and obligations arising from public company status;
♦ Private companies may lose some flexibility in managing company matters because public company shareholders must approve certain corporate actions; and
♦ Information about the company, such as financial statements and disclosures about material contracts, customers and suppliers, will become publicly available to competitors.
♦ The cost of a going public and time needed to become publicly traded;
Typical going public costs include:
♦ Transfer Agent
♦ EDGAR Filer; and
♦ DTC Fees
For more information about going public, securities law or our other services please contact a Securities Attorney at Hamilton & Associates Law Group, P.A. 01 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 or by email at [email protected]. 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 Law Group, P.A provides ongoing corporate and securities counsel to private companies and public companies listed and publicly traded on the NASDAQ Stock Market, the NYSE MKT or over-the-counter market, such as the OTC Pink, OTCQB and OTCQX. For two decades the Firm has served private and public companies and other market participants in corporate law matters, securities law and going public matters. The firm’s practice areas include, but are not limited to, forensic law and investigations, SEC investigations and SEC defense, corporate law matters, compliance with the Securities Act of 1933 securities offer and sale and registration statement requirements, including Regulation A/ Regulation A+ , private placement offerings under Regulation D including Rule 504 and Rule 506 and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, Form F-1, Form S-8 and Form S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including Form 8-A and Form 10 registration statements, reporting on Forms 10-Q, Form 10-K and Form 8-K, Form 6-K and SEC Schedule 14CInformation and SEC Schedule 14A Proxy Statements; Regulation A / Regulation A+ offerings; all forms of going public transactions; mergers and acquisitions; applications to and compliance with the corporate governance requirements of national securities exchanges including NASDAQ and NYSE MKT and foreign listings; crowdfunding; corporate; and general contract and business transactions. The firm provides preparation of corporate documents and other transaction documents such as share purchase and exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The firm prepares the necessary documentation and assists in completing the requirements of federal and state securities laws such as FINRA and DTC for Rule 15c2-11 / Form 211 trading applications, corporate name changes, reverse and forward splits, changes of domicile and other transactions. The firm represents clients in London, Dubai, India, Germany, India and throughout the U.S.