The Isolated Offering, Vol 10, Issue 5
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The Isolated Offering
A Newsletter of The Lebrecht Group, APLC
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| June 9, 2010 |
Volume 10, Number 5
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| In This Issue
Can Your Company Afford to Become (Stay) a Public Company?…….Can It Afford Not To? Investor Relations – Why We Need It.
Free Fallin’ – From NASDAQ to the Pink Sheets Securities Clearing Firm, Brokerages, and the DTC: Roadblocks to Small Business Capital Smaller Reporting Companies and Section 404(b): Where are We? UPDATE: Issuer Purchases of Their Own Common Stock in the Open Market
View LinkedIn Profile for Craig V. Butler, Esq. Contact Us http://www.thelebrechtgroup.com 9900 Research Drive 406 W. South Jordan Parkway
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Can Your Company Afford to Become (Stay) a Public Company? …….. Can It Afford Not To?This article is the first in a series of two articles that will analyze the financial costs to be a public company, and the financing opportunities that public companies have over private companies. The impetus for both articles is the simple fact that the primary reason many private companies are considering going public in the current marketplace is access to financing. In order to properly make this decision companies should know both the cost of getting and being a public company, as well as the typical financing options that might be available to them. As these articles will discuss, while there are several financing sources available to public companies that are not available to private companies, each company needs to determine total “cost” of this financing, including the costs of being a public company, in order to determine if being a public company is the proper direction the company should take at this time. The first article looks at financing opportunities available to public companies that are not usually available to private companies. The second article, due to be published in the August 2010 edition of The Isolated Offering, will take a look at the costs that it takes for a private company to go public and then the cost of being an existing public company, so those companies determine if the possible financing options are worth the price of being a public company. It should be noted that these articles are not meant to encourage private companies to go public merely for the financing opportunities, nor is it meant to discourage companies wanting to go public (or those that are public to go private) due to the costs involved in being a public company, but are merely meant to inform companies in those situations to determine if becoming or staying a public company is worth the cost of being a public company. Investor Relations – Why We Need It.Maximizing a Smaller Company’s Potential as a Publicly Traded Companyby: Donna Dolan, Principal, Jones, Dolan & Co., Inc. Investor Relations (IR) is a broad-ranging topic. In its simplest form IR means maintaining good relationships with one’s investors. In reality, the investor relations function encompasses several vital and interrelated components, including timely communication of earnings and other material events, coordination of marketing communication efforts, establishment of good relationships with investors, and strong corporate governance. To the non-strategic business manager investor relations may not seem to be that important – after all, once you have an investor’s money, put it to good use, and are paying the agreed interest or dividend payments, who cares about the relationship? While this perception may drive common business practices with debt holders, it is definitely not the best way to get and hold equity investors! In general, equity investors need more hand holding than debt holders; in particular, the Securities and Exchange Commission (SEC) requires companies to provide more assistance to these stakeholders. The primary vehicle to accomplish this is through the required disclosure of material events. While the company’s disclosure obligations associated with equity issuance are well defined, the mechanism of the disclosure process, if done by rote with an eagerness to just comply with regulations, may not provide the investor with enough information to fully understand the value of the investment. A company’s value is made up of a combination of the company’s actual performance and the investor’s perception of future performance. Investors’ perceptions of the firm, particularly of its ability to contend with market changes, can have a profound effect on valuation. Importantly, the shareowner often perceives an information gap between a company’s management team, the people who really run the day-to-day operations of the business and themselves -some might characterize this gap as mistrust. The management team, with their vast knowledge of the company’s strengths, weaknesses, competitors and markets, has knowledge of the company’s business unknown to the shareowners. This knowledge, when revealed, either intentionally or otherwise, can cause significant volatility in the stock valuation, causing the shareowner’s position to fluctuate. |
