- Securities offering
A securities offering (or funding round or investment round) is a discrete round of
investment, by which a business or other enterprise raises money to fund operations, expansion, a capital project, an acquisition, or some other business purpose.
Components of a round
Hallmarks of an offering include the following (though none are an absolute requirement in every circumstance):
* A prospectus,
private placement memorandum, or other document used to advertise the availability and terms of the offering, and to provide disclosure of information investors will need for their due diligenceefforts
* A securities filing with relevant
stateand/or federal regulators
* Various contracts and documents by which the securities are sold such as a
subscription agreement, a stock purchase agreement, and a convertible note(which documents a type of convertible security) or other loandocument
* Various subsidiary or related agreements such as a
buy-sell agreement, investor rights agreement, proxy agreements, and proposed amendments to a company's articles of incorporation
Underwriters, brokers, finders, and/or agents who help sell and otherwise facilitate the investment transaction.
* Financial projections,
financial statements, and projections and promises regarding the use of funds.
Types of rounds
Rounds are often described according to the nature of investors, the size of investment, and the stage of the enterprise.
Seed rounds (also called "friends and family" rounds) are used to launch an enterprise
Angel rounds are early investments by angel investors.
Venture rounds are large ($1M-$30M) investments lead by venture capitalfirms. These are often denoted by the series of stock sold, e.g. "A round," "B round" and so on. The name of the round suggests the stage in the company's growth. A company that reaches a "D" or "E" round without achieving some success raises concerns; a company that has been through a major restructuring may renumber its series, e.g. an "AA round" or an "A' round." Informally, these rounds might be termed a "first round,"second round," and so on.
* A mezzanine round is late stage private funding, meant to carry a company over until a public offering or major
Because there are no public exchanges listing their securities, private companies meet venture capital firms and other private equity investors in several ways, including warm referrals from the investors' trusted sources and other business contacts; investor conferences and symposia; and summits where companies pitch directly to investor groups in face-to-face meetings, including a variant know as "Speed Venturing", which is akin to speed-dating for capital, where the investor decides within 10 minutes whether s/he wants a follow-up meeting. Mass High Tech, September 5, 2008
Some specialized rounds include:
down roundis an investment that is at a lower price per share (or unit) than a previous round. This may trigger the dilution protection provisions, if any, of contracts with earlier investors.
bridge loanis a relatively small investment, short of a full-scale investment round, to help a company that would otherwise run out of money.
crunch-downis an investment in a struggling company by which the company's earlier investors and other owners are bought out entirely at a discounted price, or the value and terms of their securities are greatly reduced.
* Public offerings are rounds of investments sold to the public and listed on a
securities exchangerather than sold to a limited group of investors. An initial public offeringis the first such offering by which a formerly private company "goes public."
Offerings may be limited or open-ended. If limited, there is a cap on the number of investors, duration of the round, amount of money raised, number and nature of people to whom the offering is made, and/or the number of shares sold (if it is an equity offering). The offering is ended and the securities are granted at one or more closings. When securities issuances happen from time to time rather than one or several discrete dates, it is sometimes known as a "rolling closing."
A single round usually involves multiple investors buying a company's securities in a distinct time period, at the same price and terms, for a single financial purpose. When multiple investments are close in price and terms, they are "merged" according to
securities laws(in other words, they are treated as a single round under the law).
Rounds may have one or more
lead investors who negotiate and enforce the terms of the agreement. These are usually the parties with the greatest sophistication, resources, reputation, and/or connection to the investment. There may or may not be other follow-on or silent investorswho participate in the round. One other distinction is between public offerings for public companies, which are widely advertised and subscribed, and private offerings made by private companies, which have strict limits on the number and nature of the potential investors.
In the United States most offerings are regulated under the
Securities Act of 1933.
List of finance topics
Securities Act of 1933
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Look at other dictionaries:
securities offering — See issue (securities) offering registration of securities underwrite … Black's law dictionary
public securities offering — A securities issue placed with the public through an investment or commercial bank. Bloomberg Financial Dictionary … Financial and business terms
offering circular — A generic term applied to any document which is used to offer securities. Offering circulars are used on issues of all types of security, for example, shares and bonds. The terms offering circular, listing particulars and prospectus are often… … Law dictionary
offering — of‧fer‧ing [ˈɒfrɪŋ ǁ ˈɒː , ˈɑː ] noun [countable usually singular] 1. a product or service sold by a company, or a number of these considered as a group: • Like most new high tech products when they first hit the market, itslatest offering (=… … Financial and business terms
Offering — may refer to: Offering, a collection of donations during religious worship, see alms, tithe or charity Offering, a religious sacrifice of plant, animal or human life Offering (Buddhism), a part of devotional practice Phan (tray) Securities… … Wikipedia
offering — An issue of securities offered for sale to the public or private group. Securities offerings are generally of two types: primary (proceeds going to the company for some lawful purpose) and secondary (where the funds go to a person other than the… … Black's law dictionary
offering memorandum — USA private placement memorandum, Also known as an offering memorandum and offering circular. A document, which is typically used in an unregistered offering of securities, that provides investors with certain information about the issuer of the… … Law dictionary
Securities Act of 1933 — A US statute which primarily regulates the offer and sale of securities by an issuer to the public in the US. It creates a mechanism for the registration of securities publicly offered and the use of a prospectus in connection with such a public… … Law dictionary
securities acts — n. Federal and state statutes that govern registration of and trade in corporate securities, including the Securities Act of 1933 and the Securities Exchange Act of 1934, administered by the Securities and Exchange Commission. The Essential Law… … Law dictionary
offering — of·fer·ing n: an issuance of securities for sale raise capital through a public offering of stock Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. offering … Law dictionary