Companies evaluating financing options may consider a securities offering. In this process, a business issues securities to raise capital for purposes such as expansion, acquisitions, debt repayment or working capital needs.
Securities may include common stock, preferred stock, bonds, notes, warrants or convertible instruments. These securities may be offered to private investors, institutional investors or the general public, depending on the structure of the offering.
Public vs. Private Securities Offerings
The rules and benefits of each offering depend largely on whether it is a public or private securities offering. A public offering requires registration with the U.S. Securities and Exchange Commission (SEC) and the delivery of a prospectus. In many cases, securities issued through public offerings are listed and traded on public exchanges, although listing is not required in all instances.
Feature | Public Offering | Private Offering |
SEC Registration | Required | Often exempt |
Investor Base | General public | Accredited investors |
Disclosure Level | Extensive | Limited |
Liquidity | High (public markets) | Limited |
Regulatory Framework | Securities Act of 1933 | Reg D, Reg S, and other applicable exemptions |
Types of Securities Offerings
Companies looking for capital raising strategies or to add value for existing shareholders can choose from a range of securities offering types.
Follow-On (Secondary) Offering
Some companies want to issue additional shares after the initial public offering or shelf offerings. This type of offering, usually referred to as a secondary offering, can involve the company issuing new shares or existing shareholders selling their holdings. A follow-on offering is typically used to raise additional capital.
Debt Offering
Companies that need to raise funds for growth or to refinance debt can often choose between corporate bonds and stock offerings. Debt securities involve bonds or notes issued to investors and can be a public or private offering. Debt securities, such as bonds or notes, are issued to investors with defined interest payments and maturity dates.
Rights Offering
If shareholders do not participate, the offering may result in dilution of their ownership percentage.
Private Placement
Companies that have not gone public may pursue a private placement under Regulation D. These offerings are typically made to accredited investors and involve reduced disclosure requirements, making them attractive for companies seeking to raise capital efficiently.
The Securities Offering Process
Preparing for a securities offering requires a process that involves the issuer, investment banks, legal teams, auditors, transfer agents and regulatory bodies. Common steps include:
- Completing strategic planning and seeking board approval
- Engaging legal counsel and underwriters
- Conducting due diligence and financial preparation
- Drafting the registration statement, if the offering is public
- Waiting for SEC review and commentary
- Implementing marketing activities, such as a roadshow in public offerings
- Pricing the offering
- Closing the offering and completing settlement
The goal is to ensure a successful offering with few obstacles or regulatory concerns.
Regulatory Framework Governing Securities Offerings
Before companies issue securities, they need to understand the laws governing securities offerings. The SEC regulates actions of public companies, but there are other regulatory bodies to consider, as well. Common laws concerning securities offerings include:
- Securities Act of 1933, which requires registration of securities offered to the public
- Securities Exchange Act of 1934, which establishes ongoing reporting obligations for public companies
- Regulation A, under which some companies file a “mini-IPO”
- Regulation Crowdfunding, which exempts certain companies from having to file a securities registration
- Regulation D, which describes rules for private offerings
- Regulation S, which involves offshore offerings
- Blue sky laws, which are state-level requirements
Registration statements require detailed disclosures concerning business operations, risk factors, financial statements, use of proceeds and more. Businesses must evaluate each blue sky law in relation to federal registration requirements.
Required Documents in a Securities Offering
Required documentation depends on the type of securities offering, as well as certain aspects of the business. Companies issuing public securities usually need to file a registration statement, such as a Form S-3 or Form F-1. They need to provide a prospectus, financial statements, management’s discussion and analysis and risk factor disclosures. Certain issuers may qualify for scaled disclosure requirements under the JOBS Act.
Private offerings often include a private placement memorandum, subscription agreements and verification that each buying entity is an accredited investor. Some companies seek private placement as an exempt offering, through a Form D filing.
Securities Offerings and Investor Relations
After an IPO filing, companies must navigate ongoing regulatory and investor relations responsibilities. Although a securities offering is a defined process, it creates a number of ongoing responsibilities for regulatory compliance and investor relations. Companies must:
- Maintain clear, consistent communication with shareholders
- Align disclosures with long-term strategy
- Stay current on post-offering reporting
Offering new securities may create a whole new class of investors who require regular release of financial data and updates about company condition and progress toward strategic goals. It is a long-term reporting relationship for transparency with the SEC and shareholders.
Execute Securities Offerings with Confidence
Filing a securities offering takes a lot of data. Inconsistencies across disclosures can undermine investor confidence and delay SEC review.
Fortunately, SEC reporting software provides a comprehensive, efficient solution. DFIN offers compliance tools with these benefits:
- Automation of SEC filings
- Collaborative drafting platforms
- Integration with iXBRL tagging
- Version control and audit trails
- Secure document management
- Data validation and compliance checks
DFIN acts as a strategic partner for IPOs, follow-ons, debt issuances and private placements. We help companies ensure accuracy and speed in regulatory filings. With our registration statement preparation, financial disclosure management and secure collaboration tools, businesses can file with confidence. We specialize in transaction readiness solutions and end-to-end SEC reporting and compliance support, so you can rest assured that your filings align with SEC requirements and your long-term business strategy.
