Initial Public Offerings l IPO Going Public Attorneys

Private Placement Attorneys

An Initial Public Offering (“IPO”) is often used by a private issuer seeking to go public as part of its going public transaction.  An IPO involves filing a registration statement with the SEC covering a securities offering.

The registration statement frequently used is Form S-1, a Securities Act of 1933, as amended (the “Securities Act”) form.

IPO candidates may be private issuers seeking to go public with their securities quoted on the OTCMarkets OTCQB, OTCQX or OTC Pink tiers, or larger private companies wishing to list on a national securities exchange such as the New York Stock Exchange (“NYSE”), the NYSE MKT (formerly AMEX), or one of the NASDAQ markets (“NASDAQ”).

Going public transactions are often complex.  They can be structured in a variety of ways, and can offer a number of risks.  If not properly structured going public transactions can result in a company becoming subject to the SEC’s reporting requirements without a ticker symbol.

Using an IPO to Raise Capital in a Going Public Transaction

Most private companies seek to go public to raise capital by selling their securities.  They may do this by selling restricted securities in exempt offerings, such as private placements under Rule 506 of Regulation D or Regulation S.  Alternatively, they can raise funds by selling shares registered with the SEC in an IPO.  This money can be used for a variety of purposes, including financing of acquisitions, research and development, expansion, and reducing indebtedness.

Using an IPO to Increase Liquidity

Using an IPO as part of the going public process provides the issuer’s securities with liquidity.  A liquid stock has dependable trading volume, making it a more attractive investment than securities of a private company, which are typically held by a small number of shareholders. Liquidity is appealing to both current and future investors, and allows shareholders who may eventually sell to plan an exit strategy.

Using an IPO Allows Stock to be Used in Lieu of Cash During the Going Public Process

Using an IPO, an issuer can register shares for acquisitions or even for employee benefit plans or other purposes.  This can be done on a Form S-1 or, after completion of the IPO, on a Form S-8 registration statement.  Note that Form S-8 can never be used in a capital raising transaction or as compensation for investor relations activities.

Using an IPO to Go Public Provides Name Recognition and Visibility

Public companies have much greater visibility than companies that are privately held.  Local and national media are more likely to report matters related to public companies than private companies, increasing recognition of the issuer.

Using an IPO to Go Public Provides Benefits to Employees and Increases Employee Loyalty

Many private companies issue shares and options to officers, directors and employees before going public. These shares can be registered in an IPO, and sold once it is complete.  Using an IPO to go public allows an issuer’s founders and employees to share in its growth and success through stock options and other equity-based compensation plans that benefit from liquidity.  Once the private company has completed its going public transaction, it may use its common shares to attract and retain management and employees.

 SEC filing Requirements in IPOs

The issuer must file a registration statement with the SEC in connection with its IPO. The registration statement will usually be on Form S-1, or Form F-1 if it is a foreign issuer.  After the registration statement is filed, the SEC will typically render comments. The issuer must respond to comments in a response letter and by filing an amendment to the registration statement.

A registration statement consists of two parts. Part I contains information about the issuer’s business and financial condition, including its audited financial statements.  Part II consists of information about the offering expenses and fees, indemnification of officers and directors, and a description of recent sales of unregistered securities.  Part II also contains the issuer’s legal undertakings and the exhibits to the registration statement.  It is provided to the public but need not be included in the prospectus.

The prospectus provides disclosures of the offering terms, the anticipated use of proceeds, the issuer, its industry, business, management and ownership, and its results of operations and financial condition.  The prospectus must include the following as well as other information:

♦ Summary Information consisting of the type of security being registered, a brief description of the issuer, the amount of securities offered, the trading market for the securities and the intended use of the proceeds;

♦ Financial statements that include audited balance sheets for each of the last two completed fiscal years and income statements. The prospectus must also include unaudited financial statements for any interim periods after the last fiscal year;

♦ Management’s discussion and analysis section, describing the issuer’s liquidity, capital resources, results of operation and known trends and uncertainties;

♦ A plan of distribution detailing underwriting arrangements and underwriters’ plans for distributing the shares registered in the offering;

♦ A description of the specific risks attendant to the issuer, including risks of the offering, risks about the issuer and the issuer’s industry;

♦ A business section that describes the issuer’s business, its products and services, intellectual property, location, employees, key suppliers, customers and marketing arrangements and plans;

♦ A description of management that includes biographies, education and other information;

♦ Executive compensation of the issuer’s five highest paid executive officers, including the CEO and CFO, as well as an explanation of directors’ compensation and employee benefit plans;

♦ Disclosure of related party transactions, which include any material business transactions between the issuer and its executive officers, directors, significant shareholders, key personnel, founders and promoters; and

♦ A table of security ownership by the issuer’s officers and directors, as well as the beneficial ownership of each holder of more than 5% of the issuer’s outstanding stock.

Form 8-A in the Going Public Process

In addition to the Form S-1, the issuer often files a registration statement on Form 8-A to register a class of securities, typically its common stock under the Exchange Act.  The Form 8-A subjects the issuer to the Exchange Act’s reporting requirements after a registration statement under the Securities Act.  An 8-A, which is a very simple form, will be required if the issuer plans to list on a national exchange.

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 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