Summary of Capital
Raising in the U.S. Stock Markets
Capital raising in the U.S. Markets can very
complicated. Defining the road to reach your goals can be
made confusing by the many different choices on how to reach
investors. It will be important to define what your needs
for capital is & what is best for your company before moving
forward. Analyzing a strategic road to Publishing your
Company in the U.S. will give you the best results in the
most efficient manner.
Capital raised in the U.S. Markets will need
to be supported by a strong Business Plan. The use of funds
to be raised must apply to a profitable business. Investors
want to see what their investment will be used for to have a
confidence in your company’s future.
Accounting Practices of your company will
receive the most attention. This will be the heart of what
will drive the investors to build confidence in your
company. The “SEC” Securities and Exchange Commission will
require that your company meet all the accounting standards
of the U.S. & be audited by a recognized independent
auditor. To do a large offering of 50 million or more your
company’s success will possibly depend on one of the 4
biggest accounting companies in the world.
Raising Capital
The securities industry relies on the
public’s resolute trust and confidence that the markets
operate fairly with complete integrity to best perform its
capital-raising function. When a company needs more money
than is available through bank loans or private venture
capital sources, it raises funds in the capital markets
through the sale of stock, bonds, or other securities.
The first sale or distribution of shares by a
company in the public markets is called an initial public
offering. The company contacts an investment banker, who
advises the corporation on the price, quantity, type, and
timing of the security to issue.
The issuer can sell the securities outright
at a set price in a firm commitment to the underwriter, who
then resells them to the general public. Or, under a
best-effort arrangement, an investment banker may act as a
sales agent for issues on a commission basis. Often, new
issues are so large that one underwriter cannot commit to
the entire offering. The underwriter then invites other
investment bankers to form a syndicate to spread the
underwriting risk and carry out the security’s distribution.
The underwriter helps the company prepare a
prospectus.
The prospectus, which must be made available
to the public, assesses the company’s risks.
The underwriter, primarily through the
syndicate manager, is expected to exercise
due diligence
(reasonable effort and care) in obtaining and verifying the
information it uses to value the company and rate its
prospects.
After the company registers the offering with
the U.S. Securities and Exchange Commission (SEC), the
underwriter can begin soliciting indications of interest
from its customers. During this so-called “quiet period,”
the underwriter registers the security in states where it
will be sold. Many securities are exempt from individual
state registration if they are listed on a regional or
national stock market. Sometimes, the underwriter organizes
meetings between the company’s management and potential
investors, such as managers of pension or mutual funds.
Immediately prior to the actual sale, the
underwriter establishes the price at which each share will
be sold to the public. Once the SEC declares the offering
effective, indications of interest previously received from
customers can be confirmed as binding orders, and the
underwriter may sell them the new securities. On the first
day the stock trades, its price can rise or fall depending
on whether investors agree with the underwriter’s valuation
of the new company.
Some companies choose to sell their
securities privately to investors in a private placement,
which, because it does not involve sales to the general
public, entails fewer regulatory requirements. Since the
transaction sizes are quite large in the private placement
market, the buyers are institutions.
Securities firms raise additional funds for
public companies by redistributing a block of stock sometime
after it has been sold by the issuing company in a secondary
offering or private placement. Usually a company issues new
stock only if its stock price is high, since the larger the
supply of stock outstanding, the less valuable each share is
because profit-sharing is diluted.
U.S. Federal laws
The
federal laws re are two primary sets of federal laws that
come into play when a company wants to offer and sell its
securities to the public. They are:
-
the
Securities Act of 1933 (Securities Act), and
-
The
Securities Exchange Act of 1934 (Exchange Act).
Securities Act
The
Securities Act generally requires companies to give
investors "full disclosure" of all "material facts," the
facts investors would find important in making an investment
decision. This Act also requires companies to file a
registration statement with the SEC that includes
information for investors. The SEC does not evaluate the
merits of offerings, or determine if the securities offered
are "good" investments. The SEC staff reviews registration
statements and declares them "effective" if companies
satisfy our disclosure rules.
Exchange Act
The
Exchange Act requires publicly held companies to disclose
information continually about their business operations,
financial conditions, and managements. These companies, and
in many cases their officers, directors and significant
shareholders, must file periodic reports or other disclosure
documents with the SEC. In some cases, the company must
deliver the information directly to investors.
Public Offering
If you
decide on a registered public offering, the Securities Act
requires your company to file a registration statement with
the SEC before the company can offer its securities for
sale. You cannot actually sell the securities covered by the
registration statement until the SEC staff declares it
"effective," even though registration statements become
public immediately upon filing.
Registration statements have two principal parts:
-
Part I
is the prospectus, the legal offering or "selling"
document. Your company - the "issuer" of the securities
- must describe in the prospectus the important facts
about its business operations, financial condition, and
management. Everyone who buys the new issue, as well as
anyone who is made an offer to purchase the securities,
must have access to the prospectus.
-
Part
II contains additional information that the company does
not have to deliver to investors. Anyone can see this
information by requesting it from one of the SEC's
public reference rooms or by looking it up on the SEC
Web site.
The Basic Registration Form
All
companies can use Form S-1 to register their securities
offerings its business;
-
its
properties;
-
its
competition;
-
the
identity of its officers and directors and their
compensation;
-
material transactions between the company and its
officers and directors;
-
material legal proceedings involving the company or its
officers and directors;
-
The
plan for distributing the securities; and the intended
use of the proceeds of the offering.
Information about how to describe these items is set out in
SEC rules. Registration statements also must include
financial statements audited by an independent certified
public accountant.
In
addition to the information expressly required by the form,
your company must also provide any other information that is
necessary to make your disclosure complete and not
misleading. You also must clearly describe any risks
prominently in the prospectus, usually at the beginning.
Examples of these risk factors are:
-
lack
of business operating history;
-
adverse economic conditions in a particular industry;
-
lack
of a market for the securities offered; and
-
Dependence upon key personnel.
Raise Capital in Any Amount
If your
company is a "small business issuer," it may register an
unlimited dollar amount of securities using Form SB-2, and
may use this form again and again so long as it satisfies
the "small business issuer" definition.
One
advantage of Form SB-2 is that all its disclosure
requirements are in Regulation S-B, a set of rules written
in simple, non-legalistic terminology. Form SB-2 also
permits the company to:
-
Provide audited financial statements, prepared according
to generally accepted accounting principles, for two
fiscal years. In contrast, Form S-1 requires the issuer
to provide audited financial statements, prepared
according to more detailed SEC regulations, for three
fiscal years; and
-
Include less extensive narrative disclosure than Form
S-1 requires, particularly in the description of your
business, and executive compensation.
Staff Review of Registration Statements
SEC
staff examines registration statements for compliance with
disclosure requirements. If a filing appears incomplete or
inaccurate, the staff usually informs the company by letter.
The company may file correcting or clarifying amendments.
Once the company has satisfied the disclosure requirements,
the staff declares the registration statement effective. The
company may then begin to sell its securities. The SEC can
refuse or suspend the effectiveness of any registration
statement if it concludes that the document is misleading,
inaccurate, or incomplete.
Here
are some specifics about the financial statement
requirements applicable to some types of offering:
-
Financial statements need to be certified by an
independent public accountant;
-
If a
company other than a limited partnership cannot obtain
audited financial statements without unreasonable effort
or expense, only the company's balance sheet, to be
dated within 120 days of the start of the offering, must
be audited; and
-
Limited partnerships unable to obtain required financial
statements without unreasonable effort or expense may
furnish audited financial statements prepared under the
federal income tax laws.
-
Any
Success with going to going to NASDAQ or NYSE will
require a “Big 4 accounting Firm” This will give the
credibility that is needed to bring confidence to the
investors.
MARKET MAKERS
Market
makers are dealers who specialize in particular securities
traded on the over-the-counter market. They hold large
inventories of their securities, and they attempt to make
markets for those securities by buying and selling from
them. Market makers publish bid and asked quotes, known as
inter-dealer quotes, for other firms in the hope of making
sales.
SEC LAWYER
A
Securities & Exchange Commission Lawyer is independent from
the SEC & is a specialist in law relating to the commissions
procedures. This is necessary to abide by the many different
laws that will apply to your company. There is no one set of
laws for all companies & the SEC Lawyer will assure that
your companies capital raising efforts follow the laws that
relate to you.
Comprehensive Analysis (Due Diligence)
You will be required to supply financial
statements, information on your company, management team,
company structure, legal matters and other pertinent data
including financial projections and revenue models. This
overall analysis determines the most appropriate finance and
marketing courses of action for your company.
Document Preparation
Co-ordinate with a professional independent
consultants, the preparation of concise Executive Summary,
Offering Memorandum (includes Business Plan), Subscription
Agreement, Offeree Representative Questionnaires and related
documents, Offering literature, marketing materials and the
Bank Escrow Agreement (re: monies received from investors).
Terms of the Offering
There
will be a need to hire independent professional consultants
to analyze the Terms of the Offering, how much of your
company should be sold to raise the required amount of
capital and the proposed price per share.
Investor Relations
On Wall Street, perception is reality.
Successful investor relations, therefore, identifies
misperceptions and then deploys communication strategies and
techniques to educate the investing public to close the
communication gap. The objective is to lower the cost of
capital by ensuring the marketplace has the information
necessary to make informed investment decisions that fairly
value securities.
-
Analyst relations / sell-side and buy-side
-
Investor presentations and story development
-
Institutional targeting, outreach and follow-up
-
Retail
investor strategies and programs
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Investor conferences, road shows and one-on-ones
-
Earnings and timely disclosure announcements
-
Quarterly conference calls and web casts
-
Ongoing shareholder correspondence
-
Investor Relations website optimization
-
Financial relations audits
-
SEC
disclosure requirements
-
Annual
and quarterly report production
-
Investor kits and fact sheets
-
Annual
shareholder meetings
Public Relations
A company that aggressively manages its
public perception with proactive communications achieves
greater brand awareness, develops deeper customer loyalty
and creates stronger links with key audiences. It is proven
with a public relations process that works across all
industries will generate positive and powerful results.
-
Increase visibility for your company, your people, your
products or services;
-
Introduce products, services or an entire marketing
campaign;
-
Prepare for and provide communications counseling during
business crises;
-
Identify and manage key business issues through
effective communications;
-
Enhance communications with employees;
-
Report
financial information to stakeholders and analysts;
-
Strengthen community relations;
-
Serve
as a liaison with government agencies; and
-
Develop brand identity and corporate positioning.
United Equity Investment
is a company that helps brings your companies capital
raising efforts to a reality. We have a network of business
associates that are specialist in the Financial Markets. We
help customize your capital raising plans & design an
approach that makes the process more efficient & easier to
understand. With our experience with doing business in both
the East & West we understand the difficulties of the
different business cultures. We can help create bridge to
make your vision a reality.
Below is a small list of some of the
information that would be required to move forward. Please
feel free to call or write anytime with any questions or
concerns.
i. Last
three years of financial statements
ii.
Business plan & Intended use of Capital to be
raised
iii.
Description of business and its products and
services
iv.
Description of the facilities of the
corporate offices and/or operating plant
v. List
of Officers and directors and their resumes
