Monday, April 1, 2013

Taking BBE Public (3)

WALL STREET SMARTS, THE BLOG, IS NOW WALL STREET SMARTS, THE BOOK.  FULLY EDITED AND REVISED WITH NEW MATERIAL ON AMAZON

After meeting with the two investment companies, USA Investment Company (USA) and Stock Traders, Inc. (STI), our attorney, Carl, arranged for the Board of Directors to meet with Mason, a securities lawyer, who specializes in representing private companies considering an initial public offering (IPO).  At the meeting, Mason outlined the steps that were necessary to go public.  As securities are heavily regulated by the Securities and Exchange Commission (SEC), it came as no surprise that one of the initial documents (SEC Form S-1) which must be submitted to the SEC is a very long and detailed report on BBE's financial status, assets, liabilities and income statements for the past few years.  The filing with the SEC must also provide a full disclosure of the company's operations, directors, officers and any shareholder with more than 5% of the outstanding stock.  This report is called the registration statement.  Mason made it very clear that the SEC does not approve the shares of BBE as a good investment.  The agency simply reviews the registration statement for content to ensure that potential investors receive full disclosure of all pertinent facts about BBE.  Once the SEC approves the registration statement, the company can move forward.

The registration statement consists of two parts.  Part 1 is the prospectus.  This is the sales document, usually running to 30 pages or more, given to anyone interested in buying shares issued in the IPO.  Underwriters are required to provide investors with copies of the prospectus for a set period of time both before and after an IPO.  Consequently, they are very interested in getting copies of the document to review as soon as possible.  Part 2 contains additional detail about the issuing company.  A preliminary registration statement is produced by the company, its accountants and attorneys.  It is then circulated to the underwriters involved in taking BBE public.  After everyone signs off on the document, it is submitted to the SEC for review.  It is not unusual for the SEC staff to require changes to the form.  Since it is possible that copies of this document could end up in the hands of the investing public, the document, which has not yet been approved by the SEC, must carry a warning, printed in bold, red ink, that it is only preliminary and not an offer to sell the stock.  For this reason, the unapproved version of a prospectus is traditionally referred to as a red herring.  When the SEC finally approves the registration statement and the prospectus contained in it, it is then considered "effective."  The shares can then be offered to the public.

All companies are required to file a prospectus for every issue of equity or debt being offered to the public; however, many large, widely held public companies are allowed to use a short form prospectus since the companies are already well known in the market.  The SEC must approve every prospectus before it can be officially provided to the investing public.  It also works with the company to set a date for the IPO.

Mason then turned to the topic of stock exchanges.  BBE has to apply to an exchange to have  its newly issued shares listed for trading on it.  Each exchange has requirements which a company must meet in order to have its shares listed for trading.  He reviewed the requirements of the New York Stock Exchange (NYSE) and the NASDAQ (National Association of Securities Dealers Automated Quotation).  Although BBE is a relatively small company, it will qualify for listing on the NASDAQ.  Some of the listing requirements include a minimum of 400 round lot shareholders (a round lot is 100 shares) and a minimum of 1,100,000 shares with a minimum bid price of $4 per share.  Depending on the number of shares the company decides to issue and at what price, BBE will need a market value for its publicly traded shares of at least $8 million dollars.  Based on recent financial results and the contemplated terms for its IPO shares previously discussed with USA and STI, BBE should be able to satisfy NASDAQ's minimum requirements.

Based on the recommendation of our regular attorney, Carl, and our meeting with Mason, the Board engages him as our special IPO counsel to represent the company in going public.  We will continue following BBE's progress in the next blog.

Comments are always welcome.

16 comments:

  1. Whats up are using Wordpress for your blog platform?
    I'm new to the blog world but I'm trying to get started and create my own.

    Do you need any html coding knowledge to make your own blog?
    Any help would be greatly appreciated!

    my web blog ... options trading for beginners

    ReplyDelete
  2. I like the valuable information you provide in your articles.
    I will bookmark your blog and check again here regularly.
    I'm quite certain I will learn many new stuff right here! Best of luck for the next!

    Here is my site; handmade jewellery shops

    ReplyDelete
  3. Hey there would you mind stating which blog
    platform you're using? I'm going to start my own blog soon but I'm having a hard time making a decision between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design seems different then most blogs and I'm looking for
    something completely unique. P.
    S My apologies for getting off-topic but I had to ask!



    My weblog: http://www.youtube.com/watch?v=ddcKJDTQ7zI

    ReplyDelete
  4. It's hard to find knowledgeable people in this particular topic, however, you sound like you know what you're talking about!
    Thanks

    My site - how to make good money from home

    ReplyDelete
  5. Thank you for the comments. This blog runs on Blogger.

    ReplyDelete
  6. Howdy! I realize this is kind of off-topic however I needed to ask.

    Does running a well-established website like yours take a lot of work?
    I am brand new to operating a blog however I do write in my
    diary every day. I'd like to start a blog so I can easily share my own experience and views online. Please let me know if you have any ideas or tips for new aspiring bloggers. Thankyou!

    Here is my blog post: binary options

    ReplyDelete
  7. Inspiring quest there. What happened after? Take care!


    my page free forex signals

    ReplyDelete
  8. I have read so many content on the topic of the blogger lovers however this paragraph is truly a good article, keep it up.



    Here is my blog post: astrologie

    ReplyDelete
  9. Thank you for the comments. I hope you find the blogs helpful in your investing.

    ReplyDelete
  10. I feel this is among the most vital info for
    me. And i'm happy reading your article. But should observation on few general things, The site taste is ideal, the articles is in reality excellent : D. Good task, cheers

    Take a look at my page: Facebook fan page

    ReplyDelete
  11. Hi there, I enjoy reading through your article.

    I like to write a little comment to support you.


    Feel free to surf to my webpage :: joint pain

    ReplyDelete
  12. Aw, this was an exceptionally good post. Finding the time and actual effort to create a
    top notch article… but what can I say… I
    put things off a whole lot and never manage to get anything done.


    Visit my web-site instagram page url

    ReplyDelete
  13. Thank you for visiting the site and your comments.

    ReplyDelete
  14. First off I would like to say excellent blog! I had a quick question in which I'd like to ask if you do not mind. I was curious to find out how you center yourself and clear your mind before writing. I've had a hard time clearing my thoughts
    in getting my ideas out. I truly do enjoy writing but it just seems like the first 10 to 15 minutes are lost just trying to figure out
    how to begin. Any suggestions or tips? Thank you!

    Also visit my website :: getting twitter followers

    ReplyDelete
  15. Thank you for the comment. I just start writing and then edit later.

    ReplyDelete
  16. Hello! I simply wish to offer you a big thumbs up for your great information you have right here on this post.
    I will be coming back to your blog for more soon.

    Also visit my blog post - KatharynKLoeschner

    ReplyDelete