Securities LawCast©- Legal & Compliance, LLC- The Direct Public Offering Process Including Form S-1 Registration Statement Requirements.
The DPO Process.
One of the methods of going public is directly through a public offering. In today’s financial environment, many Issuers are choosing to self-underwrite their public offerings, commonly referred to as a Direct Public Offering (DPO). Management of companies considering a going public transaction have a desire to understand the required disclosures and content of a registration statement. This blog provides that information.
Pursuant to Section 5 of the Securities Act of 1933, as amended (“Securities Act”), it is unlawful to “offer” or “sell” securities without a valid effective registration statement unless an exemption is available. Companies desiring to offer and sell securities to the public with the intention of creating a public market or going public must file with the SEC and provide prospective investors with a registration statement containing all material information concerning the company and the securities offered. Currently all domestic Issuers must use either form S-1 or S-3. Form S-3 is limited to larger filers with a minimum of $75 million in annual revenues, among other requirements. All other Issuers must use form S-1.
The DPO Regulated Time Periods
There are generally three regulated time periods in a DPO:
(i) the pre-filing period, which begins when the Issuer decides to proceed with an offering. During this period, counsel prepares the registration statement and prospectus.
(ii) the waiting or “quiet period,” which is the time from the filing of the registration statement until it is declared effective. During this time the Issuer can engage in limited marketing (offers only) of the offering through the use of the filed registration statement, which must clearly indicate that it is not the final document (often referred to as a “red herring”).
(iii) the post-effective period, in which the registration statement is effective and the Issuer can proceed with sales of the securities registered.
In addition to disclosure and regulations related to the offering during all three periods, marketing and public communications of the Issuer are restricted. See the section “Restrictions on Communications Related to DPO’s” below.
The S-1 In General
There are four primary regulations governing the preparation and filing of Form S-1:
(i) Regulation C – contains the general requirements for preparing and filing the Form S-1, including within Regulation Care regulations and procedures related to (a) the treatment of confidential information; (b) amending a registration statement prior to effectiveness; (c) procedures to file a post-effective amendment; and (d) the “plain English” rule.
(ii) Regulation S-T – requires that all registration statements, exhibits and documents be electronically filed through the SEC’s EDGAR system.
(iv) Regulation S-K – sets forth, in detail, all the disclosure requirements for all the sections of the S-1. Regulation S-K is the who, what, where, when and how requirements to complete the S-1.
(v) Regulation S-X – sets forth the requirements with respect to the form and content of financial statements to be filed with the SEC. Regulation S-X includes general rules applicable to the preparation of all financial statements and specific rules pertaining to particular industries and types of businesses.
Laura Anthony, Esq.
Founding Partner
Legal & Compliance LLC.
330 Clematis Street, Ste. 217
West Palm Beach, FL 33401
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