Tag Archives: resale s-1 lawyer

What is a Resale S-1 Registration Statement?

In a Resale S-1 Registration Statement, securities previously acquired privately are registered for resale to the general public.

Who are the Selling Shareholders in a Resale S-1?

In a typical example, investors in a company’s Private Placement (“PPM”) are told that their shares will be “registered for resale” at a later date.  In a Resale S-1, these investors are referred to as “Selling Shareholders”, and their names are listed in a table, along with the number of shares, and an explanatory note detailing the method and date of purchase.  The PPM Offering Documents, including a Subscription Agreement, are usually included in the Resale S-1 as Exhibits.

In another example, shares previously awarded to consultants, founders or employees for services can also be registered for sale in a Resale S-1.  The supporting documentation showing the origin and history of those shares would likewise be included as Exhibits.

All of this Selling Shareholder documentation is reviewed by the company’s PCAOB auditor so that the cost basis, and value of consideration is included in the audit.

What Makes a Resale S-1 Different?

The main difference in a Resale S-1 is when the Selling Shareholders sell their shares, they keep all of the money from the sale,  and the company does not receive any funds.   Even so, the company typically pays for the cost of the Resale S-1 Registration Statement, including the audit.

How Does a Company Benefit from a Resale S-1?

One way a company benefits from a Resale S-1 is by demonstrating to future PPM investors that the company keeps its promise to later register shares.   It also benefits the company by creating a “Float.”  The Float is the block of non-affiliate, free trading shares available to trade “on the market.”

In order to justify the expense of preparing a Resale S-1, a company will typically also register a certain number of new S-1 shares itself.  When the company sells these newly registered S-1 shares to the public, the company keeps those funds.

Private Placement followed by IPO and Resale S-1 Combination

One of the most common strategies for going public on the OTC Bulletin Board or OTC Markets via S-1 Initial Public Offering (“IPO”) is to file a new S-1 Registration Statement following a Private Placement Offering.  This S-1 registers both new shares for the company to sell, and also includes Selling Shareholders who bought stock in the Private Placement (“PPM”).

Many companies use the strategy of filing a quick PPM for friends and family before filing an S-1 Registration Statement as way of obtaining some of the 35 non-affiliate shareholders Market Makers are looking for prior to sponsoring the company for a ticker symbol under 15c211.  This also helps to defray some of the administrative costs associated with going public.

In order for this strategy to be effective, the PPM documents and consideration needs to be in order so that the company’s PCAOB auditor can efficiently include the Selling Shareholders into the S-1 audit.  An experienced OTC securities attorney can help companies do both a PPM and a Resale S-1 from start to finish.

Securities Attorney for Private Placements and S-1 Resale Registrations

Matt Stout is a securities attorney focused on taking companies public on the OTC Bulletin Board and OTC Markets.   When companies engage Matt Stout as securities counsel, the PPM to S-1 process is handled efficiently and all representation is under an agreed-upon flat fee, which includes responding to all SEC Comment Letters.

Companies interested in learning more about Private Placement Offerings and S-1 Registration Statements can contact Matheau J. W. Stout, Esq. for a no cost consultation at (410) 429-7076 or mstout@otclawyers.com.

Do I Need 35 Shareholders Before Filing an S-1 Registration Statement?

No.  There is no minimum shareholder requirement to file an S-1.  Many startup companies with just one founding shareholder file S-1 Registration Statements as the first step to go public. So only one shareholder is required, along with audited financial statements, in order to file the S-1.

When are the 35 Shareholders Needed to Go Public?

The 35 shareholder requirement only applies at the time of the Company’s 15(c)211 application for a FINRA trading symbol, which a Market Maker does not sponsor until all SEC comments are cleared, and after the S-1 is declared Effective by the SEC.

Should a Company Acquire 35 Shareholders via Private Placement or After the S-1 is Effective?

While it is true that many companies acquire these 35 shareholders via Private Placement Memorandum (“PPM”) before the S-1 is filed, it is just as common for companies to sell free trading S-1 shares to friends, family and to the public as soon as the S-1 is declared Effective, in order to meet FINRA’s 35 shareholder threshold.

In many cases, it might be easier for the company to sell the S-1 shares after the Effective Date, since they are free trading and the investors may perceive less of a risk than buying restricted shares in the same company through a Pre-S-1 PPM.

The key is that those 35 shareholders are not required until sometimes months after the S-1 process is started, since the Market Maker cannot even sponsor the Form 15(c)211 application for the FINRA trading symbol until the S-1 is declared Effective.

Should We Delay our S-1 to Do a Larger Private Placement?

With that timing in mind, it makes little sense for private companies to wait forever to file their S-1 under the guise of attempting to sell more shares in a PPM.  Instead, some savvy companies considering an IPO via S-1 Registration Statement will use a Private Placement only to attract some already interested friends and family investors as shareholders so that they do not delay their S-1 audit.

Doing so allows those PPM friends and family shareholders to be listed in the S-1 as “Selling Shareholders” but also allows the S-1 audit to be completed without wasting a lot of time.   Since the audit is typically the most time-consuming part of the S-1, the sooner the PCAOB audited financials are ready, the sooner the company can go public.

OTC Markets Securities Lawyer for Companies Going Public

Matheau J. W. Stout, Esq. is securities lawyer with a practice focused on taking microcap companies public on the OTB Bulletin Board and OTC Markets OTCQB.  Entrepreneurs with questions about taking a company public via S-1 can contact Matt Stout at (410) 429-7076 or mstout@otclawyers.com for a no-cost consultation.

 

 

 

What is the S-1 Quiet Period?

The S-1 “Quiet Period,” starts when a company files an S-1 Registration Statement with the SEC and ends when the SEC staff declares the S-1 “Effective.”

During the S-1 Quiet Period, the federal securities laws place certain limitations on what information a company can release to the public. Companies that fail to comply with S-1 Quiet Period may be found to be “gun-jumping.”

Well-Known Seasoned Issuers and the S-1 Quiet Period

Well-known seasoned issuers, (“WKSI”) include those household names every investor recognize trade on the NYSE or NASDAQ.  They are in the regular habit of releasing news anyway and are thus permitted anytime to use oral and written communications, including a “free writing prospectus,” subject to enumerated conditions (including, in some cases, filing with the Commission).  WKSI are eligible to file a Form S-3 rather than an S-1.

No OTC Markets or OTC Bulletin Board company is going to fall under the category of a Well-Known Seasoned Issuer, and all Issuers with stock quoted on the over-the-counter markets should be especially careful with all communications during the S-1 Quiet Period.

SEC Reporting Issuers and the S-1 Quiet Period

All SEC reporting issuers are permitted to continue publishing or posting regularly released factual business information and forward-looking information.  This applies to those already public companies that are filing an S-1 Registration Statement after already having a trading symbol or “ticker” and after already being subject to the reporting requirements of Section 12 of the Securities Exchange Act of 1934.

This would not apply to a company which is doing its “IPO” or initial public offering, since by nature that company is private, and not yet “fully reporting” under the Securities Exchange Act of 1934.  That is, the Company is not yet releasing 10-K, 10-Q, and 8-K filings as required under the 34 Act.

Non-Reporting Issuers and the S-1 Quiet Period

Non-reporting issuers include both private companies filing an S-1 Registration Statement in order to “go public” on the OTC Bulletin Board (“OTCBB”) or OTCQB and those already public voluntary filers, Pink Sheet or Gray Sheet companies that are not SEC filers under the 34 Act.

These Non-Reporting companies can, at any time, continue publishing factual business information that is regularly released and intended for use by persons other than in their capacity as investors or potential investors.

Companies going public on the OTCBB or OTCQB by filing an S-1 Registration Statement should carefully consider the content and tone of all communications, whether they are news releases or simply posts on their blog or website.  Any reference to the the pending S-1 Registration Statement, the prospectus, or the offering, is a bad idea during the S-1 Quiet Period and may be considered “gun jumping.”

If Non-Reporting companies feel compelled to release any news during the S-1 Quiet Period they should have such news or press releases reviewed by experienced securities legal counsel prior to such releases.  S-1 lawyer Matt Stout can review news releases before they are posted.

Permitted Communications and the S-1 Quiet Period

The key issue to the S-1 Quiet Period is timing.   Communications by all Issuers more than 30 days before filing an S-1 Registration Statement will be permitted by the SEC so long as they do not reference a securities offering that is the subject of a pending or contemplated S-1 Registration Statement.

Companies planning to file an S-1 Registration Statement should review all of their past communications to see if they may have inadvertently run afoul of this 30 day guideline, and if so, should consult with an experienced S-1 lawyer like Matheau J. W. Stout, Esq. to decide when the file their S-1 Registration Statement.

S-1 Lawyer Matt Stout Can Advise Companies on the S-1 Quiet Period

Companies interested in going public via S-1 or those public Issuers planning a resale S-1 to register securities already sold in a Private Placement can contact S-1 securities lawyer Matt Stout at (410) 429-7076 or mstout@otclawyers.com.