Public Offering

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Related to Public Offering: Secondary Public Offering

Public Offering

An issue of Securities offered for sale to the public.

A business can raise capital for its enterprise through the sale of securities, which include stocks, bonds, notes, debentures, or other documents that represent a share in the company or a debt owed by the company. When a company proceeds to issue the securities, it is called an offering.

There are two types of offering: private and public. A private offering is made to a limited number of persons who are so well-informed about the affairs of the company that the company does not need to file a registration statement with the state or federal government. In contrast, a public offering is made to the public at large and is governed by federal and state regulations.

Until the 1930s the public offering of securities was subject to minimal regulation. Investors had no reliable way of knowing whether the information they received about a public offering was correct and complete. Because of the lack of regulation, fraudulent public offerings were common, leading to the sale of worthless stock.

The Securities Act of 1933 (15 U.S.C.A. § 77a et seq.), enacted after the Stock Market crash of 1929 and the resulting Great Depression, set in place rules and regulations for public offerings of securities in interstate commerce or through the mails. Before a public offering can be made, a company must file with the Securities and Exchange Commission a registration statement containing financial and other data, including the price at which shares will be offered to the public, commissions paid to those who underwrite the security, and any options to purchase that have been issued.

In addition to requiring the filing of a registration statement, the Securities Act of 1933 makes it unlawful to mail or transmit in interstate commerce any security for the purpose of sale or delivery unless it is preceded or accompanied by a prospectus (a written statement of information about the public offering) that fully discloses all material facts regarding the investment, including the financial status of the enterprise. Material facts are those that are necessary to enable a purchaser to weigh the advantages and disadvantages of the investment. The balance sheet contained in the prospectus must accurately reflect the financial status of the issuing company and should include its assets and liabilities.

Unless a company files a registration statement that is then approved by the commission, it cannot legally make the public offering. Registration of the securities does not imply that the commission has approved the issue or that it has found the registration disclosures to be accurate. It does mean that persons filing false or incomplete information with the commission subject themselves to the risk of fine or imprisonment or both. Additionally, those persons connected with making a false or incomplete registration statement or prospectus may be liable for damages to purchasers of the securities.

Intrastate securities (those not publicly offered in interstate commerce) are governed by the laws of the state in which the stock is traded. State control of intrastate securities traffic does not conflict with federal regulation of interstate transactions. Most states have enacted blue sky laws, which regulate public offerings in a manner similar to federal securities legislation. These state laws get their name from their attempt to stop the sale of stock in fraudulent and speculative enterprises that have nothing to offer but blue sky. Many states require registration of securities before a public offering can be made. If the business seems likely to commit fraudulent acts involving prospective purchasers of its securities, state registration will be denied, and the public offering will not be allowed to go forward.

References in periodicals archive ?
businesses--ranging from a school bus company to a funeral home operator--have launched public offerings in Canada, and many others are in the pipeline.
For all these and other nonpublic insurers, Rule 144A effectively provides a vehicle to issue debt securities in a private offering to a broad range of institutional investors simultaneously without undertaking a public offering and without the attendant SEC review and post-offering ongoing disclosure requirements, but at the same time achieving better execution and liquidity than are generally available in private placements to a limited number of investors.
Before a public offering, an S corporation may examine whether it holds assets unnecessary to its business operation or that it otherwise seeks to dispose of.
said one of its insurance subsidiaries also has put off an initial public offering due to the unfavorable market conditions.
The process was substantially more costly and demanding than we had anticipated," said Carr, who successfully concluded an initial public offering last February.
Since the initial public offering, Valero GP Holdings has had a total return of over 25 percent.
Ritter, appeared in the 1994 Journal of Applied Corporate Finance and was updated in 1997 by Bitter in an article titled "Initial Public Offerings.
There can be no assurances, however, that Welcome Home's initial public offering will be completed, or will be completed in accordance with the timing, pricing and other terms described above.
In addition, holders of fewer than 20% of the Company's shares issued in its initial public offering exercised their right to convert shares into a pro rata portion of the proceeds of the Company's initial public offering placed in a trust account.
announced today that it filed a registration statement relating to a proposed initial public offering by Welcome Home of 3.
Amelio, have agreed to reduce the number of common shares held by them that were issued prior to the Company's initial public offering by approximately 35%, reducing the number of such shares owned by the founding stockholders from 5,373,738 shares to 3,500,000 shares.
The Hospital Company (NYSE: HTI) announced today that with respect to the incidental registration rights offered to holders of its Warrants to purchase common stock in connection with the Company's proposed underwritten public offering of common stock, the exercise price applicable to all Warrants exercised in connection with such registration rights will be approximately $5.