You should begin this process by contacting competent professional help. This is not a do-it-yourself project. A public offering is highly specialized work requiring an investment banker (not really a banker in the traditional sense), a CPA and a lawyer.With their guidance, the first step involves drafting a registration statement. When completed, this statement will be filed with the SEC (Securities and Exchange Commission). No sale of securities can be started until the SEC reviews your registration statement and declares it “effective.” This means the SEC finds that it was prepared in conformity with the rules that apply to registration statements.
This filing has two main parts: a prospectus and additional information. The prospectus describes important facts about the business operations, financial condition and management. The additional information contains data that does not have to be given to investors, but is filed with the SEC so as to be available for public reference.
The basic registration statement, called a Form S-1, generally provides narrative information on at least the following topics:
- Nature of the business
- Types of properties owned or used
- Identity and compensation of officers and directors
- Material transactions between the business and its officers and directors
- Material transactions involving the business or its officers and directors
- Plan for distributing the securities to be sold
- Intended use of the money raised from the sale of the securities
- Financial statements audited by an independent certified public accountant
In addition to the above, the company must tell about anything else that will make the disclosure statement complete and not misleading. This includes describing any risks associated with your business. Examples of these risks include adverse economic conditions affecting your company, dependence on key personnel, lack of a business operating history, and the lack of a market for the securities being offered.
The preparation, writing and editing of this registration statement should not be taken lightly, for it is the foundation of your public offering. It is also the document that come back to haunt you if you do it poorly, including possibly providing a basis for lawsuits against you and/or your company.
Once this is done and declared “effective” by the SEC, your investment banker does most of the remaining public offering work. That firm will handle the sale of the securities, the timing with the market, the communication with potential investors, the collection of sales proceeds, and most everything else that goes on to complete the process. Your main task will be standing by with your corporate checkbook to pay for these services.