Securities Law Blog

Below are ten of our top talking points:

1. Conduct a pre-IPO private placement (without solicitation) with the underwriter acting as placement agent to “seal of approval” institutional fund investors with a long-term investment perspective.
2. Enter into a “dual track” business combination with an already publicly traded company in the sector for liquid public shares and meaningful management (Nasdaq or NYSE-MKT preferred).
3. Raise interim bridge funds to bridge the gap in the form of debt or preferred equity securities convertible into IPO shares or partially for cash.
4. Run a “warrant sweep” for cash by lowering the exercise price of outstanding warrants for a limited time.
5. Consider a public reverse merger into a funded “public vehicle” (an exchange-listed SPAC is a plus) or alongside a concurrent PIPE financing with an eye to “uplist” to a national exchange in a year.
6. Draw down on, or seek to obtain, revolving credit facilities with lenders or even better with large stockholders or customers.
7. Bootstrap operating expenses by paying key employees in shares and make the company more attractive by lining up “bolt-on” accretive acquisitions that close concurrently with the IPO.
8. Try a rights offering so that existing shareholders can get the first crack at buying in at competitive prices, with outside investors ready to soak up any unsubscribed rights as standby purchasers.
9. Continue an aggressive pursuit of business milestones that could have positive near-term impact on the company’s cash position and stock price, such as creative product crowdfunding to raise customer financing.
10. Pivot from a traditional registered underwritten IPO to a Rule 506(c) generally solicited private placement to accredited investors or to an exempt “mini” IPO under Reg. A+ of up to $50 million where there is state securities law pre-emption for issuers with audited financials.

Lastly, companies can delay the financing process entirely in the hope of better market conditions and achieving more company milestones in the future.  However, this approach is not recommended if there appears to be a lack of certainty that significant additional milestones will be met in the very near term, coupled with the risk of continuing monthly cash burn.

There are numerous factors influencing the probability of success with pursuing each alternative path, including the strength of the company’s business story, its valuation and the trading characteristics of its stock.  A higher degree of certainty in seeking financing on favorable terms is possible with the right preparation and analysis, together with experienced advisors.