Brenda Hamilton is the founder of the blog at securitieslawyer101.com/blog. A direct public offering is an offering conducted by a company on its own behalf without an underwriter.
• Direct public offerings are often used in conjunction with going public transactions.
• In a registered direct public offering, the company files a registration statement with the Securities & Exchange Commission to register shares on its own behalf or on behalf of its selling stockholders.
2. WHAT DOES IT MEAN TO GO PUBLIC ?
• For private companies and their stockholders going public refers
to the process of a company filing a registration statement with the
Securities & Exchange Commission to register its securities and
become a reporting company. This process is referred to as “going
public” even if the Company does not have a stock ticker symbol
and its shares do not trade.
• At times, Going public may also refer to the filing a Form 211 with
the Financial Industry Regulatory Authority (FINRA) to obtain a
stock ticker symbol.
3. WHY GO PUBLIC?
• Companies in a variety of industries see going public as an attractive
method of capital. Funds raised in going public transactions can be used
for working capital, research and development, retiring existing
indebtedness, acquiring other companies or businesses or paying
suppliers.
• Once a going public transaction is complete, a company can use its
common stock as currency & collateral for loans.
• Going public creates value for a company’s shares & creates liquidity for
existing and future investors.
• Going Public provides an exit strategy for shareholders and/or investors.
• Public company stockholders may be able to sell their shares or use
them as collateral.
• Public companies have greater visibility than private companies and are
often featured by the media.
• Going public allows a private company to attract more qualified
employees and key personnel.
• A certain amount of prestige is associated with public company status or
service to a public company.
4. WHAT IS A REVERSE MERGER?
• A reverse merger is a transaction in which a private
company merges into or is acquired by an existing public
company.
• After a reverse merger is complete, the business and
management of the privately held company becomes that of
the public entity.
IS A REVERSE MERGER REQUIRED TO GO PUBLIC?
No. Companies can go public using a direct public offering
even when they do not have an underwriter for their offering.
A reverse merger is not required.
5. WHAT IS A DIRECT PUBLIC OFFERING?
• Unlike an initial public offering or IPO, direct public offering is an
offering conducted by a company on its own behalf without an
underwriter.
• Direct public offerings are often used in conjunction with going
public transactions.
• In a registered direct public offering, the company files a
registration statement with the Securities & Exchange Commission
to register shares on its own behalf or on behalf of its selling
stockholders.
6. WHAT IS DTC ELIGIBILITY?
• DTC is the only custodian of securities for its participants,
which include broker-dealers.
• DTC is the only securities settlement provider in the U.S. If an
issuer’s stock is DTC eligible, DTC will hold an inventory of free
trading shares in street on deposit. These free-trading shares
are also known as the “public float”.
• Without DTC eligibility, shares can only be publicly traded if
there is physical delivery of a stock certificate and payment
between a buyer and a seller.
• Without DTC eligibility, it is almost impossible for a public
company to establish an active trading market in its securities.
7. WHAT ARE THE DISTINCTIONS BETWEEN A SECURITIES
ACT & EXCHANGE ACT REGISTRATION STATEMENT?
• Filing a registration statement under the Securities Act of 1933
, such as on Form S-1 registers an offering of securities. Shares
registered under the Securities Act, generally are not restricted
securities.
• Filing a registration statement under the Securities Exchange
Act registers a class of securities such as common stock.
• Registration under the Exchange Act does not register a
securities offering and it does not create unrestricted securities.
8. For further information about this securities law Q & A, please
contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South,
Suite 202 North, Boca Raton Florida, (561) 416-8956, or
info@securitieslawyer101.com. This securities law blog post is
provided as a general informational service to clients and friends
of Hamilton & Associates Law Group, P.A. 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, Going Public Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
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