Medley Capital Corporation Announces the Closing o
View Original ArticleThu, 23 Feb 2012 08:17:02 -0800 NEW YORK, NY (February 23, 2012) - Medley Capital Corporation (the "Company") (NYSE: MCC - News) announced the closing of the registered public offering of 3,831,566 shares of its common stock sold ...
Direct Line bankers meet with investors ahead of s
View Original ArticleThu, 23 Feb 2012 11:13:33 -0800 Bankers advising on Direct Line Group's stock market flotation have kick-started a series of meetings with prospective investors.
EpiCept to Raise $2 Million in Registered Direct O
View Original ArticleWed, 15 Feb 2012 02:57:00 -0800 Royal Bank of Scotland's insurance business has been renamed Direct Line Group ahead of a possible initial public offering (IPO).
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How to do a Direct Public Offering
U.S. direct public offerings (DPOs) are the direct sale of shares in a company to individual investors. After the shares are sold by the company, investors may or may not trade on a stock market or exchange.
Direct public offerings work better with established companies, but they can also be used for startup and emerging companies. One of the most important characteristics a company should possess for a successful direct public offering is a strong affinity for its customers, the surrounding community or the industry in which it does business. In a direct public offering, these affinity groups become the company's shareholders. A U.S. direct public offering differs from a "foreign" direct public offering in the way that you solicit capital. With a foreign offering, you offer your securities to foreign investors. This can take the form of a private/public placement of securities. See Regulation S foreign direct stock offerings.
For years, individual investors have heard about the millions, and in some cases billions, of dollars being made by venture capitalists through investments in companies in their formative stages of development.
One of viable use of a DPO is financing the expansion of profitable operations. Direct public offerings can be used to finance research and development, but public investors often become impatient during long periods of product development.
A direct public offering is less expensive than an initial public offering (IPO) with an investment banker, but only moderately so. The absence of an underwriter's commissions is sometimes more than offset by the marketing expenses a company must bear in a direct public offering. In addition, like a conventional initial public offering, the company must surrender a significant hunk of ownership to its direct public offering investors.
Ease of Acquisition: Difficult. Any transaction that involves securities is challenging. The absence of an underwriter can make the process at once easier and harder.
Range of Funds Typically Available: $500,000 and greater.
First Steps
A direct public offering is not for the faint of heart. It takes time, money and persistence. Entrepreneur Michael Flynn at Flynn Labs talked to more than 700 potential accredited investors in the course of finishing his DPO. In addition, he spent more than $100,000 in the process.
Ensure that you have a way to corral your affinity groups. Direct public offerings don't work well without a large group of investors that has some sort of connection with the company, its product or its service. On the other hand, in a somewhat frustrating arrangement, successful restaurants have a steady stream of customers but almost no information on them.
However, there are lots of ways a company can find information about people who would be naturally interested in them. Flynn, for instance, was able to buy the names of people who had purchased homeopathic medicines from list brokers. Hire an accountant. If you don't have one, get one.
Even though many companies have long-standing relationships with accountants, the production of a full set of financial statements, with notes, is often the kind of thing that falls through the cracks. This can be debilitating when you're talking to outside investors.
The beauty of most direct public offerings is that they do not require audited financial statements. If your plan is to start in the lower depths of the market and eventually "graduate" to the Nasdaq stock market or the American or New York Stock Exchange, you will eventually need them anyway.
Finally, owners of startup businesses often think they don't need financial statements. Here's why, in most cases they do. First, if there has been some kind of lump-sum investment either from the founder or some other investor--a strong selling point for meeting with new investors--the financial statements will irrefutably document its existence.
