The Form S-1

Investors are always the most interested in buying unrestricted stock, which is also known as registered stock. A company that wants to sell registered stock must file a Form S-1 registration statement with the Securities and Exchange Commission (SEC). The Form S-1 is an extremely detailed document that describes a company’s financial and operational condition, as well as other matters. Among the more important categories of information in the form are:

  • Risk factors. States the risks that may impact the company.
  • Use of proceeds. Notes how the cash garnered from sale of the stock will be used.
  • Selling security holders. Lists any current shareholders whose shares in the company are being sold.
  • Registrant information. Describes the company, its financial results, management’s discussion and analysis of the company, legal proceedings, and many other matters.

Completing the form properly requires the services of the company’s auditors and attorneys, as well as their assistance when the SEC sends back several iterations of questions about the information in the form. It is likely that a number of months will pass before the SEC declares the form effective, which means that the stock listed in the form is now registered, and can be sold without restriction.

Once a Form S-1 has been declared effective, the company having made the filing is now considered a publicly held company, which means that it must file regular reports with the SEC about its financial results and material changes in its business.

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