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					16-1
        Chapter   16

Going Public



                       16-2
    Sources Of Financing

Going Public


Private Placement


Bank Loan


                           16-3
            Going Public
   Advantages          Disadvantages
Obtaining Equity      oLiability Risk
Enhanced Ability      oExpense
 To Borrow
                       oRegulation
Enhanced Ability
 To Raise Equity       oDisclosure
Liquidity/Valuation   oPressures To
Prestige               Maintain
Personal Wealth       oLoss Of Control
                                          16-4
       Public Ownership

Initial Public Offering (IPO)


Secondary Market


Sarbanes-Oxley (2002)

                                 16-5
 Sarbanes-Oxley Timeline
 Effective                Requirements
                    Prohibit personal loans to officers/directors.
 July 30, 2002          CEOs/CFOs return incentive-based
                   compensation after erroneous financial report.
                      CEOs/CFOs must certify annual/quarterly
August 29, 2002      reports. Officers must make certifications
                       regarding company’s internal controls.
                      Responsibilities for attorneys/audit firms
January 26, 2003    increased. Disclosure requirements for off-
                       balance sheets transactions tightened.
                      Audit committees must: be independent
 April 26, 2003    directors, be responsible for compensation &
                        oversight of certifying accountants.
                                                                     16-6
               IPO- Fees
$Accounting=                           $150,000+

$Legal=                             $8,000-30,000

$Underwriter’s=                         7 - 10%

$Registration/Blue Sky/Filing=          0.02%

$Printing Costs=                 $50,000-$200,000
                                                  16-7
      Underwriter Expense
Company Sells
                              Company Shares
 To Underwriter
 At Discount        Discount = 7-10%    Share = $22.50



Underwriter                     Underwriter

 Sells To Market      Sold = 100%       Share = $25.00
 At Full/Offering
 Price                          Public Offering


                                                   16-8
     Private Placement
Less Disclosure
Restrictive Covenant
Liquidation Covenant
Qualifications- SEC (1933)
  Limited, Sophisticated Investors
  Same Information As Public Registration
  Holding Period
  Discounted 20 - 30%
                                             16-9
             Bank Loan
Debt-
  Short Or Medium Term
  Floating Interest Rate
Collateral/Guaranty- Tangible
  Contracts
  Accounts Receivable
  Machinery
  Inventory
  Land/Buildings
                                 16-10
     Other Debt Sources
Greater Flexibility Than Loans But
 Not As Much As Equity
Equipment Leasing
Mortgage Bankers
Trade Suppliers
Inventory/AR Financing Companies
                                      16-11
   Going Public Timing
Large Enough
Company Earnings/Financial
 Strength
Market Conditions
Urgent Need
Owners’ Desires/Needs
                              16-12
  Underwriter Selection
  Managing                      Underwriting
 Underwriter                     Syndicate
1. One Year Prior To Offering
2. Criteria
 a.   Reputation
 b.   Distribution Capability
 c.   Advisory Services
 d.   Experience
 e.   Cost
                                               16-13
     Registration Statement
I.        “All Hands” Meeting- Establish
          Timetable/Responsibility
II.       Preliminary Preparation
III. Registration Statement (SEC)
     A.   Prospectus
     B.   Registration Statement (Form S-1, SB-1 or
          SB-2)
                                                  16-14
         Prospectus
Narrative Form    Capitalization
                   Dilution
Cover Page
                   Financial Data
Summary           Business,
Company            Management,
                    Owners
 Description       Type Of Stock
Risk Factors      Underwriter
                    Information
Use Of Proceeds
                   Financial
Dividend Policy    Statements (5 Yrs.)
                                    16-15
      Part II- Form S-1
Red Herring- Preliminary
 Prospectus
Comment Letter- SEC
 Corrections
Pricing Amendment
Blue Sky Qualifications- State
 Law
                                  16-16
     After Going Public
Aftermarket Support- Underwriter
 Actions
Financial Community Relationship
Reporting Requirements
  Form 10-K (Annually)
  Form 10-Q (Quarterly)
  Form 8-K (Specific Events)

                                    16-17
      IPO Requirements
                                      NASDAQ
             NYSE   AMEX     NASDAQ   (Small Cap.)
Net Tangible
  Assets     $40 M    ---     $4 M      $4 M
Stockholder
   Equity      ---   $4 M      ---      $2 M
  Pre-Tax
  Income     $2.5 M $750 K   $750 K       ---
Market Value
  Of Float   $40 M $3 M       $3 M      $1 M
 Minimum
 Bid Price    ---    $3        $5         $3
                                                16-18

				
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