Direct Public (Internet) Offerings
November 18th, 2008 Filed Under naaktbelgisch.com edit
Direct Public Offerings, commonly known as Internet Offerings, are a development of the Internet and World Wide Web. Similar to SCOR offerings in the type of paperwork required, they remain an unknown as far as acceptance by the securities industry. Their primary setback at this time is that there are no acknowledged trading markets (like NASDAQ, NYSE, AMEX).
Test for a Direct Public Offering
Drew Field, on his web site (http://www.dfdpo.com/screen.htm) suggests the following test as to whether your venture is a candidate for a DPO:
1. The business would excite prospective investors, making them want to share its future.
Soon millions of Americans will become ?ecurities analysts,?using computer-based tools for screening and selecting among thousands of companies to invest their retirement funds and savings. Until then, companies will have to attract us with a story close to our personal interests. We?e not ready for the "dull but good" businesses yet.
2. There is a history of profitable operations under the Company? present management.
DPOs are sold when the prospectus is read, by cautious individuals spending their own money. With some exceptions, they want proof that management can turn a profit.
3. Company and management meet standards of honesty and social responsibility.
When people invest directly in share ownership of a company, after making their own decision and using their own money, they feel a sense of identity with that company. Polls consistently show that an overwhelming percentage of consumers prefer products from companies that aren't causing harm. That carries over to buying shares as well.
4. The business can be understood by people who may have no experience investing.
Shares are sold in a DPO when someone reads the prospectus, and sales are lost when this prospectus is difficult to understand. Try describing your business in ten words or so. Also, try telling your whole story--what your business is, what you're going to do with the public's money and the particular risks of investing in your shares--in a one-page memo.
5. The Company has natural affinity groups, with cash to risk for long-term gain.
Affinity groups may be easier to explain your business to, but also need to be large enough to buy your entire offering. For instance, people in the same area of town may be likely investors, even if they aren't also customers. Other groups may be interested in the particular technology or corporate mission of a business. Along with the number of potential investors, consider strength of the affinity (how loyal do they feel toward your company).
6. Those affinity groups will recognize the Company's name and consider its offering.
DPOs for companies with consumer branded products should carry the logo, slogans and color identifications through into the share offering materials. Companies with names that are entirely different from their product names must transfer the feelings about the known name over to the new one. The greatest challenge is to create recognition for a company with no current identification among affinity groups.
7. Names, addresses, phone numbers and demographics are in the Company's database.
There are ways to "profile" those customers and figure out how to reach them through selected media.
8. A Company employee is able to spend time as project manager, directed by the CEO.
There needs to be one person for whom the DPO is the top business priority. Experience has shown that anything less than that will lead to slippages in the schedule and a decline in enthusiasm for getting the job done. The ideal is someone earlier in their career who works directly under, and speaks with the authority of the CEO or CFO.
9. The Company has, or can obtain, audited financial statements for at least the last two fiscal years.
This is the requirement for the new securities law filing forms made available to small businesses (under $25 million annual revenue) by the federal Securities and Exchange Commission. Unless the company has been in business less than two years, we suggest that you not try to save accountants?fees by using unaudited (even "reviewed") numbers. In cases where prior years would be difficult or impossible to audit, or where accounting records need to be put in auditable shape, it may be best for the company to arrange some private financing until it is ready for public scrutiny.
John B. Vinturella, Ph.D. has almost 40 years experience as a management and strategic consultant, entrepreneur, author, and college professor. For 20 of those years, Dr. Vinturella was owner/president of a distribution company that he founded. He is a principal in business opportunity sites jbv.com and muddledconcept.com, and maintains business and political blogs.
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