Registered and exempt offerings
Under federal securities law, every offer and sale of securities must either be registered with the SEC or fit an exemption. Registered offerings, such as an IPO or a follow-on sale of stock, require a registration statement with detailed disclosure and SEC review in many cases. Exempt offerings include private placements to accredited investors, sales to large institutions for resale under SEC rules, and offerings made outside the United States. Each route carries its own limits on who may buy, how the offering may be marketed, and whether the securities can be freely resold. State securities laws add notice filings or, for some offerings, review of their own.
Disclosure is the core risk
Whatever the route, the central legal question is whether the information given to investors is accurate and complete. Misstatements or omissions in offering documents can create liability for the company, its directors and officers, and sometimes underwriters, and in registered offerings the standard for some participants is strict. That is why underwriters and their counsel conduct diligence and ask for comfort letters from auditors. Companies preparing to access capital markets should expect their financial statements, risk disclosures, and descriptions of the business to be tested line by line. Once public, the disclosure obligations continue through periodic reports and current reports.
Matching the route to the company
In an initial conversation we look at how much the company wants to raise, from whom, how soon, and what it can support in ongoing reporting. A private placement may be faster and cheaper but brings resale restrictions and a narrower investor base. A registered offering opens a broader market but commits the company to public reporting. For foreign companies, we discuss whether foreign private issuer status, American depositary receipts, or an offering outside the United States fits better. We then identify the documents, auditors, and approvals needed, and the issues most likely to slow the timetable.
