Public Offering

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Related to Public Offerings: Going Public

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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
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According to the Istanbul Stock Exchange (IMKB) data, Turkey held only one public offering in 2009 worth of 6 million USD while Korea held 69 public offerings worth of 2.6 billion USD and companies in Poland held 36 public offerings for their shares worth of 2.2 billion USD.
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of Economics, Finance, and Global Business, William Paterson University), Pricing and Performance of Initial Public Offerings in the United States is a timely discussion of newly emerging financial markets and investment strategies.
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From the standpoint of execution, Rule 144A offerings resemble underwritten public offerings, in that an investment bank or syndicate of investment banks, acting as the initial purchaser of the offering, purchases the securities from the company and then resells the securities to investors at a higher price, retaining the difference, which represents the commission or "discount" earned by the bank or banks for their services.
Not surprisingly, there has been a surge of interest in DPOs in the past year or two, according to Gwendolyn Field, co-owner of Drew Field Direct Public Offerings, a DPO advisory firm in San Francisco.
Jan Tumlir: I just read Howard's piece for the catalogue ("From My Institution to Yours"), and it occurred to me that citing Mike Kelley at the start of the essay serves to establish a link between "Public Offerings" and "Helter Skelter," where Mike was clearly an artistic presence.
S status is terminated by the public offering; the entity ceases to be a qualified small business corporation.
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