An offering memorandum is a disclosure document that is drafted by an issuing company and given to investors for their capital (hopefully). Our team has been involved in the preparation and writing of offering memorandum business documents for over 15 years. We have helped thousands of companies – in all the world’s major business hubs – create their offering documents. The importance of writing an offering memorandum, also referred to as an “OM” for short, can make the difference between getting funding and not being taken seriously by investors. Along with the business plan of the company an OM will guide the investor through the securities features of the offering, including the terms. The OM is essentially a long contract, the last part being the subscription agreement.
The offering memo will also discuss the management team and their skills, as well as the risk factors of the company. It is important to list the risk factors of the business so that investor can make an educated choice regarding investing. In addition, tax implications of the investor will also be discussed, as well as various rules and regulations involving foreign investment. The offering memorandum is an opportunity to tell the story of the company, its product and service offerings, the benefits to investors, long term payout and strategy and more. Giving a potential prospect an investor ready offering memorandum is good business practice and looks professional.
Offering memorandum business document issued by companies typically issue either equity or debt, or a mixture of both.
Equity: an equity offering memorandum is often used for companies who are selling shares, such as common stock or common shares, or for various funds such as hedge funds or mutual funds. An equity transaction is when a company normally sells an ownership type stake in a company. While this is the case for many public transactions via an IPO – where if you buy stock on the public market you are a part owner of the company – for funds this is not necessarily the case. Funds such as hedge funds may sell equity in the form of participating shares (even many classes of shares) but this does not necessarily grant ownership or even voting rights to the investor. For all private transactions relating to the sale of securities a document is necessarily to be given to an investor for him/her to make an educated decision about investing. While the prospectus is one such document and the private placement memorandum another, the offering memorandum is often given as well.
Debt: For those companies that issue debt securities in the form of, for example, bonds, convertible bonds, notes, debentures and other securities offering types, an offering memorandum is also needed. The OM will detail the amount one is raising, the maturity date, interest rates and many other variables and characteristics, including information, if need be, on clearing and settlement and depository services.
Our team can structure your offering memorandum for either debt or equity.
Worldwide Term Usage
The usage and popularity of the term offering memorandum is understood worldwide to mean a document, referred to as a “memorandum”, which details what the company is “offering” in return for investment capital. Read it backwards and you get “memorandum offering”, i.e. a document detailing the offering of securities. In addition to the term offering memorandum the most popular word for such a document is a prospectus and an offering circular and a private placement memorandum, as well a red herring and others are also employed.
Finally, each offering memorandum will include the subscription agreement, which is a document that is essentially the contract between the investor and the company selling securities. The subscription agreement outlines the terms, and has numerous places for the investor to fill out and usually gives instruction where to send a check for subscribing to the securities, or bank wire details. The subscription agreement is also of great important to the offering memorandum, and in many cases is considered the “shoes” of the documents, while the rest of the memorandum is the clothes. Said another way, without a subscription agreement there can be no transaction between an investor and the company, i.e. something is missing from the memorandum if there is no subscription agreement.
Prospectus’ team of consultants and lawyers can help draft your Shenzhenoffering memorandum for either debt or equity issuance in an effective, fast and cost affordable way.
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