Good Penny Stocks Expert
If you are at all curious about how a company issues penny stock shares, this article may be helpful.
Why would a company want to "go public" or offer company stock shares to the investing public? There are a number of reasons, primary of which is to raise capital and/or increase public awareness. For example, the owner may want to franchise or open a string of stores but doesn't have the funds to put the plan into action.
The first step, of course, is to form a team of professional advisors. The team minimally includes an attorney and accountant who are preferably familiar with public offerings and, perhaps a trusted stockbroker. On the advice of legal counsel, the first step is to incorporate or form a corporation.
Second, register the stock. Registration requires the owner to divulge a great deal of information including personal experience, background, financial statements, risk factors and to complete numerous securities disclosure reports.
The reports also focus on the how much money the owner intends to raise from the public. Minimally, there are 3 ways of offer stock to the public:
Intrastate regulation. In some states, a company can offer stock to those citizens after approval by state authorities. Intrastate regulation restricts such offering to the state involved and sets a maximum amount that can be financed.
Limited funding forms S-18 or Regulation A-1 form are completed and filed. They must be approved by the Securities and Exchange Commission or SEC which is the major regulatory body for stock securities. Form S18 provided for a much higher financing limit than Regulation A and therefore required more disclosure. Most penny stocks are registered using one of these two filings.
Full registration. This is a far more extensive and expensive form of filing. The major advantage of full registration is that there is no limit on the amount of capital can be raised.
The third major task is to meet with a stock underwriter (marketer/distributor) to select a price. The offering price generally reflects the stock prices of other companies that have similar operating histories. The overall stock market condition also affects the offering price
After the specifics of the registration are completed, a registration statement is then filed with the SEC. The SEC reviews the statement and determines whether it satisfies regulatory disclosure requirements including the 1933 Securities Act.
Following preliminary review, the underwriter receives a letter of commitment from the SEC. The letter discusses any error or deficiencies in the registration statement and the underwriter makes all corrections. Upon SEC approval, they declare the statement 'effective'.
Now, the company owner and the underwriter agree on how the stock is to be distributed. There are 3 ways for stock distribution.
Firm commitment. This is the easiest method, but it is also the most risky for the underwriter. Here, the underwriter is contractually obligated to purchase the stock offerings, which it then resells at its own risk. Firm commitments are most common under full registration. Stocks offered under this arrangement begin trading immediately after effective sale date;
Best Efforts. Under this method, the underwriter agrees to sell the stock within in certain time period, normally within 90 days on a best efforts basis. If the stock is not sold by deadline, the investors' money is returned. If sold, the stock is publicly traded. Most small speculative stocks are transacted here;
Straight or open offering. This is the least common issuance method. The underwriter agrees to sell the stock on a best efforts basis within a deadline and/or minimum quota amount. If/when this type of offering is used, the process can conceivably drag on indefinitely and so is rarely applied.
As securities are sold, the funds are collected and deposited in an escrow account. After the required number of shares sales is completed, the deal is closed, funds are deposited into the corporate account and the underwriter begins trading the stock.
Securities that are trading for the first time are considered to be in the 'aftermarket'. Here, security dealers 'make the market' by offering to purchase/sell shares at a quoted price. Following that, the investing public can trade through these market makers/brokers.
Oh, if the stock offering and trades are successful the owner may finally be in a financial position to be franchising. Always seek the services of competent advisors prior to investing
Why would a company want to "go public" or offer company stock shares to the investing public? There are a number of reasons, primary of which is to raise capital and/or increase public awareness. For example, the owner may want to franchise or open a string of stores but doesn't have the funds to put the plan into action.
The first step, of course, is to form a team of professional advisors. The team minimally includes an attorney and accountant who are preferably familiar with public offerings and, perhaps a trusted stockbroker. On the advice of legal counsel, the first step is to incorporate or form a corporation.
Second, register the stock. Registration requires the owner to divulge a great deal of information including personal experience, background, financial statements, risk factors and to complete numerous securities disclosure reports.
The reports also focus on the how much money the owner intends to raise from the public. Minimally, there are 3 ways of offer stock to the public:
Intrastate regulation. In some states, a company can offer stock to those citizens after approval by state authorities. Intrastate regulation restricts such offering to the state involved and sets a maximum amount that can be financed.
Limited funding forms S-18 or Regulation A-1 form are completed and filed. They must be approved by the Securities and Exchange Commission or SEC which is the major regulatory body for stock securities. Form S18 provided for a much higher financing limit than Regulation A and therefore required more disclosure. Most penny stocks are registered using one of these two filings.
Full registration. This is a far more extensive and expensive form of filing. The major advantage of full registration is that there is no limit on the amount of capital can be raised.
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The third major task is to meet with a stock underwriter (marketer/distributor) to select a price. The offering price generally reflects the stock prices of other companies that have similar operating histories. The overall stock market condition also affects the offering price
After the specifics of the registration are completed, a registration statement is then filed with the SEC. The SEC reviews the statement and determines whether it satisfies regulatory disclosure requirements including the 1933 Securities Act.
Following preliminary review, the underwriter receives a letter of commitment from the SEC. The letter discusses any error or deficiencies in the registration statement and the underwriter makes all corrections. Upon SEC approval, they declare the statement 'effective'.
Now, the company owner and the underwriter agree on how the stock is to be distributed. There are 3 ways for stock distribution.
Firm commitment. This is the easiest method, but it is also the most risky for the underwriter. Here, the underwriter is contractually obligated to purchase the stock offerings, which it then resells at its own risk. Firm commitments are most common under full registration. Stocks offered under this arrangement begin trading immediately after effective sale date;
Best Efforts. Under this method, the underwriter agrees to sell the stock within in certain time period, normally within 90 days on a best efforts basis. If the stock is not sold by deadline, the investors' money is returned. If sold, the stock is publicly traded. Most small speculative stocks are transacted here;
Straight or open offering. This is the least common issuance method. The underwriter agrees to sell the stock on a best efforts basis within a deadline and/or minimum quota amount. If/when this type of offering is used, the process can conceivably drag on indefinitely and so is rarely applied.
As securities are sold, the funds are collected and deposited in an escrow account. After the required number of shares sales is completed, the deal is closed, funds are deposited into the corporate account and the underwriter begins trading the stock.
Securities that are trading for the first time are considered to be in the 'aftermarket'. Here, security dealers 'make the market' by offering to purchase/sell shares at a quoted price. Following that, the investing public can trade through these market makers/brokers.
Oh, if the stock offering and trades are successful the owner may finally be in a financial position to be franchising. Always seek the services of competent advisors prior to investing
