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The Form S-1

The Form S-1 is the default registration form to be used if no other registration forms or exemptions from registration (such as would be applicable under Regulations A or D) are applicable.

A key factor in the preparation of a Form S-1 is whether the company can incorporate a number of required items by referencing them in the Form, which can save a great deal of work.  Incorporation by reference is only available if the company has not been for the past three years a blank check company, a shell company, or a registrant for an offering of penny stock.  The company must also be current with its various filings of financial information.

The main informational contents of the Form S-1 are as follows:

1. Forepart of the registration statement.  Include the company name, the title and amount of securities to be registered, and their offering price.  Also describe the market for the securities, and a cross-reference to the risk factors section.
2. Summary information.  Provide a summary of the prospectus contents that contains a brief overview of the key aspects of the offering.
3. Risk factors.  Discuss the most significant factors that make the offering speculative or risky, and explain how the risk affects the company or the securities being offered.
4. Ratio of earnings to fixed charges.  This is for the past five years and the latest interim period.
5. Use of proceeds.  State the principal purpose for which proceeds from the offering are intended.
6. Determination of offering price.  Describe the factors considered in determining the offering price.
7. Dilution.  Disclose the net tangible book value per share before and after the distribution, the amount of the change in net tangible book value per share attributable to the cash payments made by purchasers of the shares being offered.
8. Selling security holders.  For those securities being sold for the account of another security holder, name each security holder, as well as each person’s relationship with the company.
9. Plan of distribution.  Name all underwriters involved, their compensation, and their relationship with the offering.  Also outline the plan of distribution for any securities to be registered that are offered otherwise than through underwriters.  Also describe any stabilization transactions.
10. Description of securities to be registered.  For equity securities, state the title of the security and related rights, such as voting rights, liquidation rights, dividend rights, and terms of conversion.  For debt securities, state their title, the principal amount being offered and terms, such as maturity, interest, conversion, amortization, and so on; the description should also address liens, rights subordination, operational and financing restrictions, default events, warrants, and so forth.
11. Interests of named experts and counsel.  Identify any experts and counsel that are certifying or preparing the registration document, or providing a supporting valuation, and the nature of their compensation relating to the registration.
12. Information with respect to the registrant.  This section comprises the bulk of the document, and includes a description of the business and its property, any legal proceedings, the market price of the company’s stock, financial statements, selected financial data, and management’s discussion and analysis of the company’s financial condition and its results of operations.  It also requires disclosure of any disagreements with the company’s auditors, market risk analysis, and several ownership and governance issues.
13. Material changes.  Describe material changes that have occurred since the company’s last-filed annual or quarterly report.
14. Other expenses of issuance and distribution.  Itemize the expenses incurred in connection with the issuance and distribution of the securities to be registered, other than underwriting discounts and commissions.
15. Indemnification of directors and officers.  Note the effect of any arrangements under which the company’s directors and officers are insured or indemnified against liability.
16. Recent sales of unregistered securities.  Identify all unregistered securities sold by the company within the past three years, and the use of proceeds.
17. Exhibits and financial statement schedules.  Provide exhibits, with a related index, for such items as the underwriting agreement, consents, and powers of attorney.

The Form S-1 is a serious undertaking that will likely result in a document having the size of a small book.  It requires massive internal effort, as well as substantial input by and review of the company’s auditors and counsel.  The result is a major expense, and results in the diversion of management time away from operational matters.  Thus, there is any excellent reason why companies use every other means at their disposal to avoid raising funds through a Form S-1.

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Related Topics

Form S-8
The initial public offering
Listing on a stock exchange
Regulation A
The shelf registration