Generally, a direct public offering occurs when a company sells its stock directly to the public (investors). In doing so the company does not market the stock through an investment firm or a broker/dealer. As long as the company follows the rules and regulations set up by the SEC the stock can be sold to anyone.

DPOs are most often used by outstanding small-to-medium size companies who may be too small for offering as an IPO through a public offering path.

Costs vary for public offerings. Universally an IPO is the most expensive and may take from six months to as much as a couple of years to bring about.

An APO can cost over a million dollars and take from six to as much as 18 months to bring to fruition.

In contrast a direct public offering (DPO) can be completed in 9 months and often for less than $100,000.

Rather than using brokers or investment banking firms to market the stock DPOs are often marketed locally, through distribution channels, and over the internet.

For example:

– Local marketing may include billboards and through worker families.

– Distribution channel marketing often includes printing advertisements for the offering on product labels.

– Over the internet may include advertising on local and international investment sites.

DPO Advantages

– Since IPOs are often initially offered to favorite clients of the investment banking firm, when a firm does not market to those people, the company has a greater opportunity to acquire investment capital.

– Investors stock is liquid.

– Often companies use the DPO to raise capital to acquire other companies.

– Public stock can be available to induce higher levels of performance from employees.

DPO Disadvantages

– Raising capital without professionals is difficult, time consuming, and costly.

– Being a public company has financial and legal reporting requirements which are expensive and time consuming to create.

DPO Requirements

A firm can complete a DPO if it follows the requirements outlined by the SEC. It is usually recommended that a company wanting to do a DPO utilize the expertise of a consulting firm.

DPO requirements are similar for the IPO, APO, and DPO. These requirements include audited financial statements, internal financial statements, and SEC required registration forms.

Once the SEC has declares the registration effective and compliant with requisite blue sky laws the company offering stock their stock by DPO can sell to anyone.

Blue Sky Laws

In 1926, three years before the beginning of The Great Depression, Irving Berlin wrote the song, “Blue Skies” for the musical “Betsy.” The musical failed but the song was an instant hit with the audience asking for 26 encores the first night. The song portrayed the gleeful, always upward, “everything will continue to get better” attitude of the 1920s.

Previous to The Great Depression, not only was insider trading, but public deception on a wholesale level, and even the bribery of media sources who promoted stock manipulators was common. The song “Blue Skies” was a perfect title for laws protecting consumers from fraud when fraud was rampant.

Blue Sky Laws, passed by and very similar in written form and punishments across all states, includes registration of all:

– Securities sold

– Stock broker/dealers/firms

The Blue Sky laws are administered and enforced by each state’s regulatory agencies.

Dr. Brent Lundell owns www.GainStreamGroup.com, a venture capital sourcing and consulting company, and is a partner in The Guinn Consultancy Group, Inc. The Guinn Consultancy Group provides a wide array of business services, including seminars, webinars, and venture capital sourcing services. See the group website at www.theguinnconsultancygroup.com or contact them for additional information at 800-335-9269.

Dr. Brent Lundell owns http://www.GainStreamGroup.com, a venture capital sourcing and consulting company, and is a partner in The Guinn Consultancy Group, Inc. The Guinn Consultancy Group provides a wide array of business services, including seminars, webinars, and venture capital sourcing services. See t

Author Bio: Dr. Brent Lundell owns www.GainStreamGroup.com, a venture capital sourcing and consulting company, and is a partner in The Guinn Consultancy Group, Inc. The Guinn Consultancy Group provides a wide array of business services, including seminars, webinars, and venture capital sourcing services. See the group website at www.theguinnconsultancygroup.com or contact them for additional information at 800-335-9269.

Category: Finances
Keywords: Finance,Business Funding,Venture Capital,