SIE 11 - Offerings

• A private investment in public equity which is the private raising of capital by a company that's publicly traded
• For example, BofA sold reg d stock to Warren Buffet during the financial crisis.

• Issuer
• Underwriting manager (investment banker)
• Syndicate members
• Selling group

They need capital and they hire an underwriter

• They facilitate distribution and they assume varying degrees of liability (depending on the offering type)
• They sign an underwriting agreement with the issuer

These are broker/dealers that assist in selling the shares. They share liability with the underwriting manager.

They are broker/dealers that accept no liability and only assist in sales. They sign a selling agreement with the manager and they accept no capital risk. They generally market to retail investors.

Firm commitment (capital risk) vs. best efforts (no capital risk)

• Pre-registration
• Cooling-off
• Post-registration

• Securities Act of 1933
• Document preparation and due diligence begins.
• The registration statement is completed
• B/Ds and RRs may NOT communicate with the public

• The issuer files the registration with the SEC
• The issuer distributes the preliminary prospectus (red herring)
• They "blue sky" the issue - i.e. they file in states that require registration
• They hold a final due diligence meeting

• The effective date has occurred
• Sales are confirmed and the final prospectus is delivered
• This prospectus must contain the SEC no-approval clause (saying that the SEC has registered, not approved).

• Statutory
• Preliminary
• Summary
• Free Writing

A condensed form of the registration statement that provides detailed information on the offering (includes the preliminary and final prospectuses)

• This is called a red herring. It is used during the cooling off period and it omits the offer price, underwriting/dealer discounts, and proceeds to the issuer.
• Once a final offering price is set, a final statutory prospectus must be filed.

• A short-form prospectus used ONLY for mutual fund offerings
• The investor must be informed that a statutory one exists.

• This is a communication that doesn't meet the standards of a statutory prospectus.
• This must include a legend recommending that investors read the statutory prospectus.
• E.g. emails, press releases, and marketing materials

• US Gov't and agency securities
• Municipal securities
• Securities issued by banks
• Securities issued by non-profits (church bonds)
• Short-term corporate debt (maturities not exceeding 270 days) [corporate paper]
• Securities issued by small business investment companies (<100 members) [hedge funds]

• There must be a purchaser representative.
• They can be appointed by a non-accredited investor to evaluate the risks
• They may not be an officer, director or >10% owner/issuer unless they're related to the investor.

• It is like a prospectus for a a private placement. It is required for all investors if any non-accredited investors are included (but if there are none, it's not needed)
• It includes the use of proceeds, suitability standards, and financials

Rule 144

• They require voter approval
• They are subject to debt limitations placed on the municipality which limits its ability to add debt above its debt ceiling

• No voter approval required
• Consultant must produce a feasibility study