Direct Public Offerings – Securities & Going Public Attorneys

Direct Public Offerings - Securities & Going Public Attorneys
While going public offers many benefits it also comes with risks and quantities of regulations with which issuers must become familiar.  Despite the risks, the U.S. capital markets remain one of the most attractive sources of financing in the world. Going public is a complicated & intricate procedure, and it is important to have experienced going public attorneys help your company navigate through the process and deal with the Securities & Exchange Commission the (“SEC”), Financial Regulatory Industry Authority (“FINRA”) & Depository Trust Company (“DTC”).

Going Public – Initial Public Offering-IPO v Direct Public Offering-DPO

In an initial public offering (IPO), the company offers and sells stock to the public through an underwriter for the first time.  When a company cannot locate an underwriter, it may sell its own shares using a direct public offering. Any sales of common stock by the investors in the IPO or DPO are called secondary sales or a secondary offering. Offers and sales of securities in IPO are regulated by three primary federal laws. These are the Securities Act of 1933, the Exchange Act of 1934, and the Sarbanes Oxly Act of 2002. These laws were created to protect investors.

Benefits of Going Public & Public Company Status

A few of the benefits of public company status include:

  • More access to capital;
  • Increased liquidity;
  • Exit strategy for investors and existing shareholders;
  • Ability to use stock as a currency;
  • Capital for future acquisitions; and
  • Prestige of public company status.

Drawbacks of Going Public

Going Public and selling shares in an IPO is not for every company. While there are significant benefits of public company status, there may drawbacks for some companies. Drawbacks of going public and public company status include:

  • Significant management’s time to comply with initial public offering and ongoing reporting obligations;
  • Limited and regulated communication with stockholders; and
  • Increased pressure to product positive short term results.

Going public is geared towards large companies, and may not be a suitable going public strategy for smaller businesses under all scenarios . The going public process begins with the company’s management and its board of directors.  The board of directors should consider the advantages and disadvantages of going public and the needs of the company. In other words, the board of directors must determine if going public is in the best interest of the company and its shareholders.

If the board approves a going public transactions then management will select the going public team, which will include a securities & going public attorney and an accounting firm registered with the Public Company Accounting and Oversight Board. The company will also require a market maker to sponsor its application for a stock ticker symbol. Once the going public team is engaged, the company should begin preparing its disclosures for the registration statement. Form S-1 is the most commonly used registration statement. A Form S-1 registration statement can be used for an IPO or DPO.

Form S-1 contains two parts. One part is the prospectus which is the document presented to investors.  The prospectus is both an offering document and a disclosure document. The prospectus includes a detailed description of the company’s securities, business and management. The prospectus disclosures include management’s compensation and any transactions between the company and management; the names and amounts of shareholdings of the company’s principal shareholders; audited financial statements; a discussion of the company’s operations and financial condition; information on the intended use of the offering proceeds; and a description of the company’s dividend policy, capitalization and underwriting agreement if the company is conducting its initial public offering.

The company’s securities and going public attorney should perform a detailed due diligence investigation of the company’s management, financial condition, competitive position, performance and business.  Once the disclosures are drafted, the Form S-1 will be presented to the Securities and Exchange Commission (“SEC”) for their approval or comments. Most often, the SEC provides comments that require the issuer to provide responses and an amendment to its Form S-1.  Once the SEC has approved the Form S-1, the registration statement is declared effective.

 Going Public –  Reverse Merger – Alternative Public Offering

Some companies go public in a reverse merger.  A reverse merger is a way for a private company to go public by merging into a pre-existing public company. Most often the existing public company is a shell company that has no assets or liabilities. In a reverse merger, the public company assumes the business and operations of the private company.

Reverse mergers pose significant risks to companies seeking to go public. Often shell companies are hijacked and have significant liabilities. Reverse mergers have been the subject of multiple investor alerts by the SEC and FINRA. Locating a legitimate public shell company and arranging a reverse merger is difficult. It is recommended that the company engage an experienced securities attorney assist in reverse merger due diligence process.


There are many benefits associated with going public and transitioning from a privately held company into a publicly traded company.  An IPO is one method of going public but is rarely an option for small companies.  A DPO provides an appealing option for small companies seeking public company status.  Reverse mergers pose significant risks and are more costly than an IPO or DPO.

Going public and public company status offers an opportunity to raise capital, increase liquidity and gain public recognition.  It is critical that companies seeking to go public, strictly comply with the laws that govern the going public process and public company status.  When a company makes the decision to go public, it should consult with a qualified going public securities attorney to weigh the benefits and risks of public company status and most beneficial structure for going public.

For further information about going public, 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 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 & Going Public Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 N
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855