What Is a Securities Offering?

To raise funds for expansion, businesses often opt to raise capital through a securities offering. Many small companies offer equity in the form of common stock, while more established companies may also offer bonds representing their debt obligations. To offer equity or debt securities in the US, companies must either be registered with the SEC or exempt from registration in accordance with the federal Securities Act and state securities laws.

Equity securities grant partial ownership interest to the purchaser, or stockholder. For equity offerings, a company files articles of incorporation specifying the amount and type of stock it plans to issue. To protect investors, state and federal regulations also require companies to disclose specific information to stockholders.

Unless specifically exempt under the Securities Act, companies are required to file a registration statement with the SEC providing key information about the company, its securities and the offering. Once the SEC declares the registration statement effective, the company is allowed to make its initial public offering (IPO). When a company registers an offering with the SEC, it officially becomes a public company.

Registration statements have two parts. The first is the prospectus, which is the legal offering made by a company issuing securities. The prospectus covers key facts about the issuer’s business operations, risks, daily operations and management in addition to audited financial statements. The issuer must deliver a prospectus to everyone who buys or offers to buy its securities. The second part of the registration statement includes confidential company information the issuer is not obliged to provide to investors, but must file with the SEC.

Companies typically use the SEC Form S-1 to prepare the registration statement for a securities offering. Rules for regulation statement disclosures are outlined in Regulation S-K, and financial statements must be prepared for registration statements in compliance with Regulation S-X. Completed registration statements are filed using the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.

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