By Teresa McUsic
Direct public offerings take investing to the individual.
Your company needs money.
Your personal funds have dried up, you've tapped your father-in-law to the
max and none of your friends will return your calls.
Consider what Jennifer Barclay, owner of Blue Fish Clothing, did to raise a cool $4
million: a direct public offering.
Barclay, who sells clothes to accounts ranging from small boutiques to Nordstrom's and
Neiman Marcus, knew she had a loyal customer base. Now, she wanted them to share ownership
in her company, which employs 160 and had $8 million in annual sales.
But, instead of the traditional tombstone offering announcement that runs in newspapers,
she put it on brightly colored, fish-shaped tags that she hung on all the clothing made by
the company. She used direct marketing of her company shares instead of a securities
By the deadline date for reaching the initial offering amount of $2.5 million, Blue Fish
had sold the maximum of $4 million. Trading of the shares began on the Chicago Stock
Exchange. The company got the capital it needed.
Blue Fish is just one of hundreds of companies starting to look to direct public offerings
as a way to raise capital, according to Drew Field, a consultant who has put together more
than $100 million in corporate shares in more than 20 DPOs for entrepreneurs.
Now lie shares his expertise in a book: Direct
Public Offerings: The New Method Taking Your Company Public (Sourcebooks, 217
Direct public offerings are different from the more traditional initial public offering in
that a DPO uses direct marketing to sell its shares, and an IPO uses a group of securities
The IPO is not working very well, however, Field writes.
American households are ready, willing, and able to invest billions of dollars into direct
shareownership of businesses but they have not been doing that," he writes. The
reason we are not buying corporate shares is that we are not being sold corporate shares.
We are not being sold corporate shares because that role has been left exclusively to the
securities industry, which no longer appears to have either the interest or the
ability to market corporate shares to the American households.
Brokers who specialize in selling stock to individual investors are a vanishing breed,
Field writes. At the same time, securities firms that specialized in IPOs have been among
the hardest hit in an industry that is shrinking through liquidations and mergers.
Meanwhile, institutional money managers have taken over as Wall Street's primary customer,
Field said. And complex financial instruments, including such things as options and asset
securitizations, are now the basic products of the securities industry.
So if Wall Street isn't the answer for raising funds, what is?
Field tells readers that the paradigm is shifting from IPOs toward DPOs.
Wall Street is choosing to concentrate on the past. The future will be in direct
relationships between entrepreneurial corporations and individual investors," he
That new relationship and why it is being forged is explored by Field in depth to show
readers why this trend is emerging.
Technology, specifically the use of the Internet to market the shares of those company
offerings, will play a major role in the DPO, Field writes.
We are entering the stage where the techniques of direct marketing will create a flow of
capital from individual investors to entrepreneurs," he writes.
Along with an interesting discussion on this new trend, Field provides a hands-on review
for company owners to assess whether they are ready for a DPO, as well as chapters on how
to implement the process.
Reviewed By Teresa McUsic