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The Private Stock Offering |
The Private
Stock Offering
If you want to raise money for a company without having assets to
borrow against, chances are that you will want to consider an offering
of securities as your primary strategy. A securities offering generally
occurs when you raise money from a group of investors who are expecting
you to manage and spend their money; they are taking a gamble that you
will succeed in generating a profit. Whether the offering includes
debt, equity, or a combination of the two, no other unsecured financing
program provides the versatility and success rate of a securities
offering.
Broadly speaking, securities offerings can be separated into two
classifications: private and public offerings. A private offering is
the simplest form of a securities offering, but it is also the most
restricted. In a private offering, you offer investments to friends,
family, and business associates. While entrepreneurs can avoid many of
the registration, reporting, and other requirements associated with
public offerings, investors must generally be limited to a small group.
In fact, you may not advertise or broadly solicit investors with a
private offering. This is the primary stumbling block for most private
offerings, as many entrepreneurs simply do not have a sufficient
contact base to sell out the securities.
A public offering, while subject to greater regulation and more complex
than a private offering, allows the entrepreneur to advertise and sell
securities to strangers.
This is a tremendous advantage over a private offering. Public
offerings can either be limited direct public offerings (called "DPOs")
or full registrations (the traditional Initial Public Offering, or
"IPO"). Direct public offerings are generally much simpler and subject
to fewer regulations than IPOs.
They are also relatively inexpensive to conduct. However, unlike IPOs,
securities offered through DPOs are not typically available to the
public over the counter or via securities exchanges. This limits the
distribution channels, and places an increased responsibility on the
issuing company to market the securities.
All securities offerings are subject to regulation by state and federal
agencies. There are differing legal provisions and circumstances that
you will need to take into account, depending on the type of securities
offering you choose. Unless you have prior experience with offerings,
you will need one or more professional advisors to help you make
decisions for your program.
Copyright 1996-2004 Master Plan Strategies Inc., ALL RIGHTS RESERVED
Master Plan Strategies is a consulting group that manages investment
and divestment programs. The firm offers assistance with all the steps
necessary to complete an offering of securities, from project planning
to consulting on an investor marketing program.
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