Monday, April 22, 2013

Taking BBE Public (6)

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

In the months following our shareholders' approval of the initial public offering (IPO) of BBE stock, our corporate officers were very busy, not only running the business, but also devoting a substantial amount of time getting the company ready for its IPO. Carl, our corporate attorney, and Mason, our IPO counsel, revised BBE's Articles of Incorporation and Bylaws to meet SEC requirements.  Among other changes, we increased the number of directors for our Board and recruited several directors from other publicly traded companies.  The new Board members had no other connection with BBE and therefore qualified as independent outside directors under the applicable rules and regulations.  Although we continued to use our regular accounting firm for routine work, we made arrangements with a nationally recognized accounting firm to conduct the necessary audits of past years' operations and issue the opinions required to qualify for our stock to be listed on the NASDAQ stock exchange.

When all of the preliminary corporate housekeeping was done, our investment bankers from USA Investment Company (USA) and Stock Traders, Inc.(STI) worked with Mason to put together the registration statement and prospectus for an IPO sale of 1,500,000 shares of BBE's common stock in a price range of $30 to $40 per share.  The documents were submitted to the SEC.  It took two months to get the registration statement approved by the agency.

When we merged with Blog Topics, Inc. (BTI) several years ago, BBE had authorized a second series of common stock (B shares with reduced voting rights) which were given to the BTI blog writers at no cost to induce them to stay with us after the merger.  Subsequently, we issued the same type of shares to all of our employees.  Based on advice from our underwriters, the B shares are to be converted into A shares so all shares have the original voting rights.  In addition, we reached agreement with Gobble, Inc. and Bob and Mary to convert their preferred shares into common shares after the IPO.   As part of readying BBE for the IPO, the Articles of Incorporation were amended to authorize five million shares of common stock and to merge the two classes of common stock into one class of shares with full voting rights.  The shareholders of BBE owned 13,500 A shares (full voting rights) of common stock.  The employees owned 12,000 shares of B shares (reduced voting rights) of common stock.  With a stock split of 100 to 1, the authorized and issued 25,500 common shares (now one class) increased to 2,550,000 shares.  Each of our shareholders received his or her proportionate share of the increased number of shares.  All shareholders agreed to a 180 day lock up period during which they could not sell any of their shares after the IPO.

As the date of the IPO approached, our underwriters recommended that BBE set the IPO share price at $35 per share (1,500,000 shares could generate proceeds of up to $52,500,000).  USA Investment Company (USA) gave us a firm commitment to buy 1,000,000 shares at a price of $32 per share.  It will earn its fee by selling those shares to its institutional clients at the IPO price of $35 per share.  It will own any shares it either cannot sell or chooses to hold for its own account.  Stock Traders, Inc. will use its best efforts to sell the remaining 500,000 shares to its retail clients at the IPO price of $35 per share.  It will earn a 10% commission on all sales.  STI is not obligated to buy any shares.  It will act only as BBE's agent to sell as many shares as it can.

The offering is a success.  On the day of the IPO all 1,500,000 shares are taken.  BBE receives sale proceeds of  $32,000,000 from USA and $15,750,000 from STI (500,000 shares @ $35 per share less 10% commission) for a total of $47,750,000 in new capital to run the company.  The new shares held by the public represent 37% of the 4,050,000 issued and outstanding shares of BBE.  The original shareholders with their collective 2,550,000 shares still maintain control of the company.

We will conclude our story of BBE in the next blog.

Comments are always welcome.

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