Close X



Registration Statements and Initial Public Offerings (IPO's)

For Initial Public Offerings (IPO's) we perform due diligence, draft Registration Statements and Prospectuses and communicate with the Securities and Exchange Commission (SEC) until all outstanding comments are satisfied. The firm provides "corporate conversion" services and assists privately-held companies evolve into compliant public companies. Our firm establishes operating practices and procedures, codes of ethics, and filings necessary to satisfy compliance and reporting requirements of the Sarbanes Oxley Act and the Securities Exchange Act of 1934.

Our firm works with auditors; assists with establishing transfer agent relationships; prepares and reviews underwriting agreements; communicates with FINRA; and prepares Registration Statements and prospectus. Of course, we also communicate directly with the SEC.

Initial Public Offerings (IPO's)

Initial Public Offerings (IPO's) have come under increased scrutiny by regulatory bodies and the investment public in recent years. It is now more important than ever before to make every possible effort that all offering documents and disclosures are properly drafted. There is simply no margin for error.

The infusion of capital from a well-received IPO can provide growth companies with funds needed to expand into emerging markets, hire additional staff as well as strengthen research and development. The first step though is securing the services of a securities law firm or SEC attorney experienced in drafting Registration Statements and communicating with the Securities and Exchange Commission (SEC).

What is a Security?

Technically speaking, the term "security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

The Securities Act of 1933

The Securities Act of 1933 requires mandatory registration by businesses seeking to sell securities in their companies. The purpose of this securities law is to guarantee that securities cannot be issued to the general public without first satisfying thorough due diligence and disclosure exercises. In general terms, a security is defined by the Securities and Exchange Commission (SEC) as any investment instrument that is a fractional and undivided interest such as a note, stock, bond, or debenture. Basically, if parts of a whole are sold to multiple investors for the purpose of speculation, these parts are classified as securities.

Legal Counsel is Retained

It is advisable that legal counsel be retained by the issuing company before they even begin to seek out the services of auditors or a managing underwriter. The IPO process is difficult and expensive enough without having to repeat steps that were executed incorrectly or missing critical steps entirely. Experienced legal counsel acts as the IPO guide, assisting the issuing company to save time and money by drafting mandatory filings correctly. Counsel must also effectively communicate with the SEC throughout the underwriting process to confirm due diligence and compliance requirements are satisfied.

A Managing Underwriter is Selected

A managing underwriter or investment banking firm is then selected that will spearhead the offering. This is a highly critical stage of the process so it is necessary to complete a thorough due diligence on the prospective underwriter or investment banking firm. It is also highly advisable to review the performance of the underwriter's previous offerings when considering their participation.

Offering Structure is Established

Initial Public Offerings can be made up of stock, warrants or a combination of both. A warrant is otherwise known as a convertible security and, when offered in conjunction with shares of stock, is referred to as a "unit".

When deciding upon the IPO structure the primary consideration is the number of shares offered versus the offering price per share. The general industry rule of thumb is that a minimum of 1,000,000 shares is preferred in order to produce a public float large enough to satisfy wide distribution and support a liquid aftermarket.

Price is Set

The issuing price of the stock is based on a variety of factors including;

•  Book value (net assets divided by outstanding shares)

•  The trading price of stocks for comparable businesses

•  What the market will bear

•  Price paid by previous investors and/or shareholders

Listing Requirements

Listing requirements vary greatly from one exchange to another.

The Over the Counter Market (OTC) which includes both the Bulletin Board and Pink Sheets, does not have requirements as to the number of shareholders, price per share or asset value of the company to be listed.

If an issuer intends to have their stock listed on the NASDAQ or the American Stock Exchange (AMEX) then specific price levels must be set and maintained. If the price of a security drops below a mandatory price threshold for a specified period of time, it will be delisted and then relisted on a lesser exchange such as the OTC Bulletin Board or Pink Sheets. In addition to share price, exchanges take into consideration aggregate market value of the offering.

Legal Counsel Drafts the Registration Statement

Legal counsel then works with auditors who create audited financial statements. Counsel also drafts the Registration Statement, the document that discloses the financial condition of the issuing company and all details of the offering structure to the SEC. The Registration statement also contains the intended use of the equity to be raised as well as material transactions with insiders.

The first half of the Registration Statement is the prospectus, the disclosure document read by potential investors to allow them to perform their own due diligence prior to participating. The second half consists of additional information which is available to the public on the SEC website and EDGAR system.

Corporate Counsel Communicates with the SEC

Once the Registration Statement is filed with the Securities and Exchange Commission (SEC), revisions are requested and details of the offering must then be redisclosed or clarified. Comments are issued by SEC staff and any deficiencies in the Registration Statement are corrected until the document is approved.

The communication process between the SEC and corporate counsel is vital to the timely completion of the IPO. If handled incorrectly the offering can be delayed for months.

Legal & Compliance Understands the IPO Process

Our securities attorneys understand the importance of your offering and make every possible effort to complete your IPO in a timely and cost-effective manner. Our goal is to save time by satisfying disclosure and registration requirements as early on as possible in the IPO process. Time saved is time that can be dedicated towards building a more productive company.

Secondary Offerings

We also complete all forms of Registration Statements for secondary offerings including; S-1; S-4 (merger); or S-8 (employee stock option plans) Registrations Statements. Essentially, these are the same documents prepared in coordination with Initial Public Offerings (IPO's).

Contact us Today

The Nick Yocca Law Firm is committed to answering your questions regarding business law, corporate compliance, and other important legal matters in Orange County.

We'll gladly discuss your case with you at your convenience. Contact us today to schedule an appointment!