SEC reporting companies and non-reporting companies both need to raise capital periodically. As a company grows and expands, its need for additional capital may increase. A company may use various financing methods to raise capital. Depending on a company's situation, the options for an offering of equity securities range from a traditional non-shelf public offering, to an offering registered on a shelf registration statement, to a PIPE offering to a private placement relying on Section 4(a)(2) of the Securities Act. However, public and private offerings each have advantages and disadvantages.

In a public offering, a company has access to an open trading market in which it can freely solicit investors. The securities issued in a public offering can typically be resold freely by investors and because of this immediate liquidity (all other things being equal) can usually be sold for a higher price and are more attractive to investors.

However, if a company is not already an SEC reporting company, the costs and consequences of undertaking a public offering often outweigh the benefits. The registration process in a public offering itself is lengthy and costly, even if a company can take advantage of the relief provided by the public offering provisions of the JOBS Act.

After a company conducts a public securities offering, it must become an SEC reporting company. There are significant costs and disadvantages to this, including costs and loss of confidentiality associated with SEC periodic and other filing requirements and of complying with corporate governance requirements and accounting and financial reporting requirements applicable to reporting companies. Detailed disclosure required in certain SEC filings, such as information on executive compensation, director and officer biographies and doing business in politically troubled countries, could cause discomfort for some companies. This detailed disclosure also opens up the company and its management as more likely targets for litigation.

Because of these considerations, conducting a registered equity offering is more likely to be a realistic option for a company that is already a reporting company. In particular, the process is generally shorter and less costly for a company that is eligible to register a primary offering of securities on one of the SEC's short-form registration statements (Forms S-3 or F-3). This applies especially to a well-known seasoned issuer, which is typically eligible to file an "automatic shelf registration statement" and conduct offerings without pre-review by the SEC.

Reporting and non-reporting companies can also choose to conduct a private placement of equity securities. The process for conducting a private placement is typically much quicker and less expensive than a public offering. Unlike a public offering, typically a historically non-reporting company that completes a private placement does not need to become a reporting company.

However, depending on the exemption from registration that a company relies on, a non-reporting company faces several limitations on the offer and sale of its securities, including limits on the type of investors it may offer and sell the securities to. Investors also typically receive restricted securities that may not be eligible for immediate resale.

Practical Law's Corporate & Securities team has created numerous resources that guide both the selection of the appropriate type of securities offering and the process for completing the offering.

When deciding whether to access capital via the equity markets, one of the company's first decisions is to decide on the type of offering. For the various options for making an offering of equity securities, see Comparative Analysis of Methods of Accessing the Equity Capital Markets: Chart. This resource analyzes both public and private offerings with a focus on these key considerations:

Our Practice Note, Road Map for Undertaking a Private Offering describes the process for conducting a private placement of securities from the decision to seek financing to the completion of a transaction. It summarizes some commonly used exemptions from registration used by issuers in unregistered securities offerings and discusses:

To find other relevant Practice Notes, Standard Documents, Resolutions and Checklists, click on "Unregistered Offerings" under Related Content on the right-hand side of this resource. These resources would be particularly relevant:

Our Practice Note, Registration Process: Overview outlines the process for registering an offering of securities with the SEC. It examines all aspects of the registration process starting with the organizational meeting and ending with the closing of the offering and includes:

To find other relevant Practice Notes, Standard Documents, Resolutions and Checklists, click on "Registered Offerings" under Related Content on the right-hand side of this resource. These Practice Notes would be particularly relevant:

Counsel for issuers and underwriters often settle issues by appealing to a market standard. Practical Law specializes in informing subscribers of "what's market" for:

For example, Practical Law's What's Market database provides subscribers numerous recent underwriting agreements in a dozen different industries to resolve an issue of concern, such as the type of carve-outs that should be included in the company lock-up. Simply visit the underwriting agreements database and take the following steps:

This produces a customized report analyzing the carve-outs in the selected deals.