5 Steps to Prepare for a Direct Public Offering

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Ever wish you could cut out the middleman in investing? Good news, you can with a DPO (direct public offering).

In a direct public offering vs IPO, you approach investors directly to buy stock in your company rather than a trading company hosting it. Accredited investors are not required. Some well-known direct public offering examples include Ben and Jerry’s, Spotify, and Real Pickles.

Companies that do well with direct public offerings are generally looking for funding on the lower end. Their investors have a unique interest in the business that inspires them to get involved.

While you may not raise capital as quickly with a direct public offering, it does open doors for those who may not qualify to invest otherwise.

Preparing for a Direct Public Offering

Preparing for a direct public offering requires you to comply with regulatory standards. You must also attract your own investors. Working with a financial advisement firm can help prepare you for this. 

1) Create Your Offering Memorandum

Your offering memorandum gives your potential investors an idea of your goals, the possible challenges you may face, and what terms they take upon investing with you. 

In a direct public offering, you get to set up the terms. Your investors should be clear on them before buying in.

2) Ready Supporting Documents

Pull your other paperwork together. You’ll need to have copies of all of your other business records. Make sure your financial reports are ready and in line. 

These records determine the value of your company and the cost of your shares.  

3) Get Ready for an Audit

Your documentation will likely need to be submitted for an audit. This is a good time to address any ambiguity in your business plan so that auditors can review a clear plan.

4) Advertise to Investors

Without a broker running the deals, you will need to let potential investors know that your offer exists on your own. Advertising, contacting, and generating leads for investors will be on your shoulders. Alternatively, you can hire a management company that will help you. 

5) Sell Your Shares

Now that everything is lined up, it’s time to sell your shares. You will be able to offer your investors the details in your offering memorandum. Your shares are already priced fairly.

You have prepared documents for financial assessments and audits. Your investors know about your direct public offering. All that is left to do is get set up for sales. 

Work with an advisor to set up direct purchases with your investors. 

Get Advice on a Direct Public Offering

If it sounds like your business is the right fit for a direct public offering, get in touch with Solomon RC Ali Corporation to begin the process.

From your offering memorandum to your final sale, we can assist you in the process of taking your company public and finding the funds you need.