Having an attorney write an opinion letter for a prospectus offering is quite common. Our team of attorneys at Prospectus.com write opinion letters for all types of public an private offerings, including for IPOs and listing, as well as private placements for Reg D, Reg S, Reg A and 144A, and those in between. Creating prospectus is one of the first items a company undertakes when seeking to raise capital for their business. An offering prospectus is a formal legal document that is required to raise capital. A prospectus is a legal document which incorporates aspects of interest charges and other rules governing investment in company. In addition, after making a prospectus the offering document must be filed with the relevant government financial securities regulator and relevant state securities regulator, and provides details about an investment offering for sale to qualified institutional investors or to the public at large, known as retail investors. There are typically two types of prospectus; (i) the preliminary prospectus, often referred to as “red herring”, “draft red herring” or “draft red herring prospectus” (DRHP) and (ii) the Final Prospectus, also referred to as Statutory Prospectus aka Offering Circular.
What Prospectus.com Can Do for Companies Pursuing a Private or Public Offering to Raise Capital
Our team of securities industry consultants, investment banking veterans and attorneys can assist with the writing and drafting of your company’s offering prospectus or offering memorandum necessary for your capital formation process. Whether you are conducting a private or public offering for debt or equity issuance, our expert team can ensure that your offering prospectus is structured to maximize success as you seek to raise capital from qualified investors. Here are the basic (7) steps regarding our process:
- Our staff conducts the initial analysis of your company.
- We will recommend the best course of action, taking into consideration time frame, budgets and overall needs.
- We undertake all work and begin the process. This would include the drafting of the preliminary and/or final prospectus, or any other required documents, such as the private placement memorandum, or legal agreements and/or opinion letters from our attorneys.
- We send the documents to you for review.
- Once approved, and if you need, an attorney opinion letter can be included in the paperwork.
- If you require filing or registration with various agencies we will undertake as well.
- We are a start-to-finish firm and our number one goal is the successful growth of our clients.
Public vs. Private Offering Prospectus
Some of the most common interchangeable terms in the offering document space is the usage of the word “prospectus” for both private and public offerings. Which is correct? Traditionally speaking, the term prospectus is most often associated with a public offering or listing on a stock exchange. A company going through the stages of an initial public offering must create a prospectus. However, in the private placement world, it has also become common to use the term prospectus, even though the most appropriate term would be “private placement memorandum”, “PPM”, or even “offering memorandum”. Even within this narrow field, the offering memorandum or private placement memorandum (PPM) can be associated with a hedge fund or mutual fund, or a basic company raising capital. Many refer to the private placement document process by simply calling it prospectus, as worldwide this is the most common term designated for raising capital. Our team assists with public prospectus writing and offering circular documents worldwide.
Prospectus Writing for Offering Equity Securities
There are two type of equity offerings that are most common, private and public. Equity is essentially ownership in a company. In return for capital an investor may be given equity, or a percentage of the company. Private offerings that issue equity do so often with a prospectus or an offering memorandum. Equity offering documents vary from country to country as they must comply with various federal and local state or province rules. We can assist with any private equity offering document or prospectus globally.
Prospectus Writing for Debt Securities
Bonds and Notes
Prospectus writing for debt issuance can be complicated. Debt is essentially a company giving a piece of paper, called a “note” or a “bond” to an investor with a promise to return the investor’s capital at a certain point in time (called a maturity date), and most often an interest payment (called interest rate) at a fixed time. Interest payments vary, and Private Offerings of debt may vary to pay interest, for example, monthly, bi-annually or yearly, or even at maturity. A prospectus is needed for issuing debt, this way an investor can make an educated decision about investing. Regarding the difference between issuing notes and bonds, this depends mainly on the length of the debt. Traditionally a note is under 10 years, while a bond may exceed 10 years in length. In addition, many companies will issue convertible bonds or convertible notes. In such convertible debt, the notes or bonds will “convert” to equity at a given time, essentially making the note holder or bond holder an owner.
Prospectus.com can assist with your debt prospectus needs. We are the world leading firm that specializes in public and private prospectus writing and general business and legal document writing services.
What Does a Preliminary Prospectus Include?
A preliminary prospectus includes the name of the company issuing the stock (“Issuer”) or the mutual fund manager that is issuing shares, the amount and type of securities being sold and, for stock or equity offerings, the number of available shares. The prospectus also details whether an offering is public or private, the fees charged by the underwriters for floating shares to the investors and names of the Issuing company’s principals. A brief summary of the company’s financial information, whether the local securities regulator has approved the prospectus and other pertinent information is also included.
Fees in a Prospectus
Because the fees that most mutual funds charge is withheld from investors’ profits, the fees are listed in a table near the beginning of the prospectus. Fees for purchases, sales and transferring assets among funds are included. This simplifies comparing the costs of various mutual funds. High-cost funds have fees exceeding 1.5%, whereas low-cost funds have expenses below 1%.
Risks in a Prospectus
A prospectus is issued as a way of informing investors about the risks involved with investing in a stock or mutual fund. The information also protects the issuing company (Issuer) against potential legal claims brought by investors or other parties that claim pertinent information was not fully detailed before the investor put money into a security.
Risks are typically disclosed early in the prospectus and described in more detail later. The age of the company, amount of management experience and their specific roles or involvement in the business, and capitalization of the stock issuer are described. A table detailing which people own stock is included and is an important clue to help prospective investors determine whether the principals are holding onto their stock. If shares are being sold or liquidated by management (also known as “insiders”), there may be a financial issue with the business.
Final Prospectus aka Statutory Prospectus aka Offering Circular
- The final version of a prospectus for a public offering of securities. This document is complete in all details concerning the offering and is referred to as a “statutory prospectus” or “offering circular.”
- Because open-end mutual funds are continuously offering shares to the public, a fund prospectus is usually updated annually and made available to the public. Mutual fund prospectuses are all of the “final” variety.
BREAKING DOWN ‘Final Prospectus’
The most important difference between a final prospectus and a preliminary prospectus is that a preliminary prospectus is NOT an official offering to sell securities and the final prospectus is the official offering document and contains the price of the securities being sold.
- Prospectus Writing
- IPO Stock Exchange Listing
- Bond Offerings
- Feasibility Study
- Hedge Funds and Mutual Funds
- Offering Memorandum
- Private Placement Memorandum
- Offering Circular
- Explanatory Memorandum
- Information Memorandum
- Fund Setup Formation
- Securities Identifiers
- Registration and Filing
- Legal Work
- Escrow Services
- Business Plans
Opinion Letter Prospectus