Our team of 144A offering consultants can initiate a 144A offering with just some of the following services:
A 144A offering has been compared to an initial public offering (IPO), only in a 144A the various disclosures needed in an IPO are not required. A 144A offering is considered to be the fastest way to raise large amounts of capital in the least amo0unt of time, while staying private, as opposed to a public offering. Here are some features of a 144A offering.
• An offering memorandum or offering circular is drafted. This 144A private placement memorandum or 144A offering circular is drafted in a similar fashion as a public offering’s prospectus.
• In the 144A offering, the underwriters, which are usually referred to in this context as the “initial purchasers”, market the offering memorandum and seek to raise capital or drum up excitement.
• Once interest is shown, the issuer and the purchasers of the 144A securities agree upon pricing terms.
• Usually, these first purchasers get to buy the securities from the issuing company at a premium discount, typically below the offering price .
• These purchases can then immediately resell the securities to the ultimate buyers at the offering price.
• A 144a debt offering is considered to be more flexibility in disclosure because there are no detailed disclosure requirements and initial purchasers and their counsel are more willing to be flexible than in a public offering. In an IPO the entire company’s history is open for all to see, while in a 144A offering it is not.
• A 144A offering can also be completed faster than an IPO. This is mainly due to the fact that the issuer’s offering memorandum does not need to be filed or reviewed by the SEC (Securities and Exchange Commission).
• A 144A offering also does not require that periodic reporting be conducted of the securities laws.
• A 144a Offering can only be solicited to certain individuals or institutions with a certain amount of net worth. This limits the number of investors in a 144A. Typically QIBs are solicited (Qualified Institutional Buyers). This restriction also adversely affects the secondary trading market.
• A 144A offering also has restrictions that are imposed on the resale of the securities. This ensures that the price may not be as high as in the case of a public offering.
• As opposed to a public offering where one can solicit openly, in a 144A private offering one is restricted from advertising and publicity.
In order to minimize the disadvantages of a pure Rule 144A offering, many companies will also agree to an exchange offer.
• The SEC basically allows this type of exchange offer if debt securities are involved or, in the case of non-U.S. companies, either debt or equity.
• The company agrees to file a registration statement under the Securities Act of 1933 with a specified time period after the closing of the Rule 144A offering (usually 90 days) in order to register an exchange offer.
• In the exchange offer, the company offers to exchange a class of security that is fully registered and freely transferable for the securities sold in the Rule 144A offering that are subject to restrictions on resale.
• The terms of both classes of securities are otherwise identical.
• The company also typically agrees to pay specified damages to the holders of the securities sold in the Rule 144A offering if the exchange offer is not consummated within a specified time period.