Public Offering . . .
refers to a sale of company securities
that is registered with the federal Securities and Exchange Commission
(SEC) and state blue sky commissions. It is an offering and subsequent
sale of company securities that does not rely on an exemption from the
33 Actís registration requirements. Shares issued in a public
offering are freely tradable (unless they are otherwise restricted
because the holder is an insider).
Public offerings generate needed cash
but are expensive and time-consuming to conduct. They also subject the
company to ongoing reporting and disclosure requirements with the SEC.
At the same time, however, they create a market of freely tradable
company securities that the company can use to raise capital in the
future and that management or employee shareholders can use to convert
their holdings into cash. Having publicly traded stock makes company
shares in employee incentive plans more attractive because the shares
are easier to convert into cash.
An active market for company shares
makes it easier for a company to expand its activities through the
acquisition of other businesses. Because they are readily convertible
into cash, registered company shares can often be used instead of cash
to acquire a company. With the proper deal structure, registered
company shares can also be used to ease the immediate tax burden of a
seller caused by his companyís sale and make the acquisition easier
to close. See:
Public, IPOs (Initial