Selling securities to the general public requires an effective registration statement, and getting there shapes everything a company says for months. A traditional IPO means audited financials, a prospectus that plaintiffs' lawyers will read line by line if the stock falls, rounds of SEC comment letters, and an underwriting agreement with its own allocation of risk. Smaller companies can use Regulation A+ to reach retail investors at lower cost. We guide issuers through both, working with management, auditors, and underwriters' counsel to produce disclosure that presents the company well and survives scrutiny.
When Registration Makes Sense
Companies register offerings for different reasons: to raise capital at scale, to create a public market for employee and investor liquidity, to use stock as acquisition currency, or because the shareholder base has grown past Exchange Act Section 12(g), which requires registration once a company has more than $10 million in assets and a class held of record by 2,000 persons or 500 who are not accredited. Public companies register follow-ons, resale shelves for PIPE investors, and debt. The decision turns on cost, timing, readiness for quarterly reporting and internal controls, and whether private capital or an exempt offering would do the job. We help boards weigh those factors before the expensive work starts.
Section 5, Forms S-1 And S-3
Section 5 of the Securities Act forbids offers before a registration statement is filed and sales before it is effective, and it controls the form of written offers in between. First-time issuers use Form S-1, which requires full disclosure of the business, risk factors, management's discussion and analysis, executive compensation, and audited financial statements. Companies that have reported on time for at least twelve months can use the shorter Form S-3, which incorporates Exchange Act reports by reference and supports shelf registration under Rule 415, with limits on primary sales by companies with less than $75 million in public float. Well-known seasoned issuers can file automatic shelves effective on filing, and emerging growth companies get scaled disclosure under the JOBS Act.
The IPO Process And Gun-Jumping
An IPO usually starts with an organizational meeting, moves through drafting, due diligence, and a confidential draft submission, then works through SEC comments before a public filing and a road show. Communications are restricted throughout. Rule 163B lets any issuer test the waters with qualified institutional buyers and institutional accredited investors, Rule 169 protects ordinary factual business communications, and Rules 164 and 433 govern free writing prospectuses after filing. Gun-jumping, such as an executive interview promoting the deal, can force a delay or a disclosure of potential rescission liability. We train management on these rules, review press and marketing, and run the disclosure and diligence work alongside the underwriters.
Section 11 And 12 Liability
Registered offerings carry liability that private placements do not. Section 11 makes the issuer strictly liable for material misstatements or omissions in an effective registration statement, and directors, signing officers, underwriters, and experts are liable unless they prove a due diligence defense. Section 12(a)(2) reaches prospectuses and related oral communications, and Section 15 adds control person liability. Because purchasers generally need not prove reliance or intent under Section 11, these claims follow many significant post-IPO price drops. The Supreme Court's Cyan decision allows them in state court, and Delaware permits charter provisions that send them to federal court. We build the due diligence record during the offering and defend these claims with our securities litigation practice.
Regulation A+ As A Middle Path
Regulation A lets companies offer securities to the public through an SEC-qualified offering statement on Form 1-A instead of a full registration. Tier 1 allows up to $20 million in a 12-month period but requires registration in each state of sale. Tier 2 allows up to $75 million, preempts state registration, and requires audited financials and ongoing semiannual and annual reports, with non-accredited investors limited to 10 percent of the greater of their income or net worth unless the securities are listed. Companies can test the waters before filing. Reg A+ suits companies with an engaged customer base and a modest raise. Common mistakes are underestimating audit timelines and overpromising in investor marketing, which still carries Section 12(a)(2) liability.
