What is a Direct Public Offering?
In a direct public offering, your business raises capital by
marketing its shares directly to its own communities--such as its customers,
employees, suppliers, distributors and neighbors. DPOs are an alternative
to underwritten public offerings by securities broker-dealer firms, in which a company's
shares are sold to the broker's customers and prospects.
What Are the Advantages of a Direct Public
In a DPO, you control your shareowner mix by
targeting the specific communities that place the highest value on your products, beliefs and prospects for the future. This is particularly important if you
don't want to be pressured to compromise your values and ways of doing business. DPO's
offer a competitive advantage in the marketplace by strengthening customer loyalty.
Direct public offerings are considerably less expensive
than traditional underwritten offerings, and don't have the restrictions that are usually
associated with bank and venture capital financing. DPOs can be cost-effective for
offerings as small as $500,000.
What Services are Provided by DPO Advisors in Direct Public Offerings?
Drew Field/Direct Public Offerings is the pioneer
in direct share marketing. We have helped clients do successful DPO's since 1976, raising
over $250 million. From this experience, we have created an electronic toolkit, with a narrative guidance through the entire process, linked to each form and document. We license our toolkit to qualified direct public offering advisors. Most DPO engagements include these steps:
Decision Analysis. Advisors help management consider the
opportunities, risks, costs, timing of a DPO, compared to the your alternatives. They
gather and analyze information about the business and your objectives as owners. The Decision Analysis Seminar discusses regulatory issues, pricing the offering,
marketing plans, specific tasks to be accomplished and costs involved in a DPO.
Preparation for the Offering. There is generally
some "corporate cleanup" work required, such as obtaining audited financial
statements for a securities filing, preparation for a "due diligence" review and
changes in corporate structure. Advisors suggest ways in which these matters can be handled and
assist in preparing the company for public ownership. They help select members of the DPO
team and prepare a detailed responsibility schedule and a budget.
Pricing Analysis. The purpose of our Pricing
Analysis Report is to guide the corporate board in determining the percentage of their
company to be sold to the public for the amount of capital to be raised. Our toolkit provides advanced
valuation methodologies, giving special consideration to the nature of the investor base
and the DPO process. The Report is also available to securities regulators as a response
to any pricing challenges that may arise.
Prospectus Preparation & Regulatory Filing. DPO advisors
work with management, corporate counsel and auditors in choosing the appropriate
securities filing format. They manage the design, drafting and review of the prospectus and
other regulatory documents. They handle the preparation, filing and processing of state and
federal securities filings and compliance.
Designing the Marketing Program. The DPO team prepares a
"Marketing Pyramid," identifying the prospective market for the shares
in levels of purchasing potential. They can then select the most
appropriate marketing tools for each target group and make the most effective use of
resources. Advisors prepare a detailed marketing program, assist in the training of all
persons involved in the marketing process and monitor programs to assure compliance
with securities laws. They also help design and implement a computerized
prospect/investor data base management system.
Aftermarket trading. If your business chooses and qualifies for
an exchange listing, advisors work with stock exchanges to effect a post-offering listing. They
prepare the listing applications and assist with the required regulatory filings. If the shares are not to be listed, the advisors arrange an "Order Matching Service." They help establish an ongoing shareowner relations
and regulatory compliance program. They also offer aftermarket consulting services, helping
you develop and maintain programs to continue attracting individual investors.
Managing the Process. Our program recommends that you have an in-house DPO manager, who can spend at least half-time during the most intense
portions of the preparation, regulatory filing and marketing processes. Advisors provide daily
support and guidance to the DPO manager. Responsibility Schedules and Budgets are
revised and supplemented as the process unfolds.
Fees. Advisors charge a fixed fee for the full scope of
their services. The amount of the fee depends upon the preparation required, the number of
states in which the offering will be made and the total amount to be offered. About
two-thirds of the fee is payable in installments as the work progresses. The balance is
payable upon the completion of the offering. If the offering is canceled or postponed for
any reason, the company is responsible only for the installments that have then come due.