28 Jan The “Going Public” Process–Detailed Steps for Taking Your Company Public
We’ve gone over the go public process before, but I thought it would be helpful to provide some of the specifics in a brief post. Here they are, in typical “go public” order, the steps to take your company public.
Letter of Intent
Before we will allow any company to retain our services, we first present the company to a broker-dealer to get their commitment to act as market maker if the company successfully registers to go public.
Once the company has received a letter of intent from the market maker, they can retain the services of the sponsor broker-dealer that will prepare a private placement memorandum (PPM).
A securities attorney will be retained to act as legal counsel for the company and will open an escrow account and handle the collection of funds received in the private placement round of funding.
A FINRA licensed broker-dealer will raise $1,000,000 by selling company shares to 40 accredited investors. The investors will sell their shares to the general public once the company goes public.
Physical stock certificates are issued to investors that purchase company shares. These shares are restricted and cannot be sold or traded until the company registers the shares with the SEC.
The investor funds deposited in the escrow account are distributed to the company while some of the proceeds are allocated to pay the companies that are providing the service of taking the company public.
The company will retain the servies of a PCAOB registed public accountant to prepare and certify the company’s financial statements which will be included in the S-1 registration statement.
The securities attorney will prepare and file an S-1 registration form to take the company public and allow the removal of the 144 restriction legend from investors’ stock certificates.
The company will retain the services of a broker dealer that will act as a market maker and will provide a firm bid and ask price for the stock. They will handle the initial sale of the investors’ stock.
Deposit Investor Shares
The investor will open a brokerage account with the market maker and deposit the stock certificates into their account. The shares will remain restricted until a transfer agent certifies the shares as free trading.
The company will retain the services of a transfer agent that will create a certfied shareholder list that will allow investors’ shares to become free trading after the S-1 registration becomes effective.
The market maker will prepare and file form 211 (rule 15c2-11) with FINRA allowing the company to receive a trading symbol and be traded on the OTC Markets.
Blue Sky Registration
The company will register with Moody’s or S&P for a “manual exemption” allowing the public sale of a stock by investors in 38 states. Registration in the remaining 12 states will be filed as necessary.
The market maker will prepare and submit the DTC Eligibility form to Despository Trust & Clearing Corp., which will allow stock transfers and settlement to take place over the DTC electronic network.
Set Stock Price
The broker-dealer/market maker will calculate and set the initial share price, which must be submitted to FINDRA for approval. Once buy and sell orders enter the system, the quote will reflect those orders.
Company Begins Trading
The market maker will begin filing offer/ask orders by selling the investors “free trading” shares which were registered in the S-1 statement and deposited into the investors’ brokerage accounts.
The company will retain an investor relations firm to increase market exposure and investor awareness by presenting the company to both individual and institutional investors.