1. Carrie A. Ratliff King & Spalding LLP February 14, 2018
Federal Registration of Offer and Sale of Securities
Carrie A. Ratliff
King & Spalding LLP February 14, 2018

2. Topic Overview What is a registered public offering?
Legal and regulatory framework
Overview of offering process
The typical parties
Types of public offerings
Underwriting process
Key documents
Timing of IPOs and other non-shelf offerings
Timing of shelf takedowns
Forms and disclosure

3. What is a Registered Public Offering?
A public offering is the process by which a company and/or its existing security holders sell securities (debt or equity) to the investing public in a transaction registered under the Securities Act of 1933 (Securities Act)
Based on the principle that any transaction in securities must be registered under the Securities Act or made pursuant to an exemption from registration

4. Legal and Regulatory Framework
The Securities Act of 1933
Sets forth disclosure standards
Governs mechanics of the offering
Imposes liability for violations
State securities laws
Generally preempted by federal law
Stock exchanges
Impose qualitative and quantitative listing standards
Set forth corporate governance standards

5. Legal and Regulatory Framework
Securities and Exchange Commission (SEC)
SEC’s Division of Corporation Finance reviews registration statements
Review focuses on:
Compliance with technical disclosure requirements
“Fair” and “balanced” disclosure for investors
Accounting issues and financial disclosure
Provide initial comments within 30 days of initial filing, if reviewing
Financial Industry Regulatory Authority (FINRA)
Reviews underwriting arrangements to ensure they are fair and reasonable to the issuer
Imposes limitations on compensation of underwriters
Underwriters are required to make representations

6. Overview of Offering Process -- The Typical Parties
Issuer (the company/registrant)
Selling shareholders (when applicable, typically in equity transactions)
Underwriters (investment banks)
Counsel to the issuer
Counsel to the underwriters
Auditor (independent registered public accounting firm)
Agents
Equity securities: transfer agent
Debt securities: trustee
Depository Trust Company (DTC)
Financial printer
Optional: Investor relations firm, compensation consultant

7. Overview of Offering Process -- Types of Public Offerings
Primary offering: the issuer sells its securities (equity or debt) to the public
The first public offering of equity securities by an issuer is commonly referred to as an “initial public offering” (IPO)
After an IPO (usually within 6-12 months) the issuer may conduct a “follow-on” offering
Secondary offering: existing shareholders of the issuer sell their holdings (typically equity) to the public
The issuer does not receive any proceeds from a sale by shareholders
Combined primary/secondary offering: both the issuer and existing shareholders sell shares to the public in the same offering
Both the issuer and selling shareholders receive proceeds from the sale
Exchange offer: the issuer exchanges unregistered restricted debt securities for registered debt securities

8. Types of Public Offerings -- Initial Offering
Initial offering: A non-registrant offers securities for the first time on a public basis (typically equity securities in an IPO)
Emerging Growth Companies (EGCs) can take advantage of the JOBS Act
Confidential filing (now allowed for all companies)
Reduced financial statements
Reduced ongoing disclosure in some areas
EGCs are generally companies with less than $1 billion of revenue
IPOs are reviewed and commented on by the SEC
Register a set amount of securities
Accompanied by a roadshow / marketing effort
See Annex A for indicative timeline

9. Types of Public Offerings -- Shelf Registration
Shelf registration offering: The issuer or selling shareholders offer securities on a delayed or continuous basis from time to time from an effective registration statement
If Form S-3 eligible (or smaller reporting company per FAST Act), provides ability to incorporate by reference future filings and avoid post-effective amendments
Can register securities to sell when convenient
Registration statement expires 3 years from effectiveness
For well-known seasoned issuers ($700 million in public equity float (i.e., voting stock held by non-affiliates)):
Registration statement automatically effective (no SEC review prior to effectiveness)
Need not register a specific amount of securities and can add classes of securities at any time prior to sale by means of a post-effective amendment
Immediate takedowns of securities permitted

10. Types of Public Offerings -- Subsequent Registration
PIPE transaction: the issuer privately places equity securities with institutional investors and agrees to register the securities at a later date pursuant to a registration rights agreement
Does not initially involve a public offering
Issuer is required to effect a subsequent registration so that the investors can resell their shares without restriction
Back-End Debt Exchange Offer: the issuer completes a 144A offering with sales to qualified institutional buyers (QIBs) and agrees to register the securities by a certain date pursuant to a registration rights agreement
Issuer is required to effect a subsequent registration so that the investors can resell their securities without restriction
Still subjects issuer to reporting requirements as a SEC registrant

11. Overview of Offering Process -- Registration Statement, Prospectus and UA
Registration statement and prospectus
Detailed disclosure document that must comply with SEC rules and regulations
Forms prescribed by the SEC (e.g., Forms S-1 and S-3)
Issuer has liability on documents
Primarily drafted by the issuer and its counsel
Underwriters provide “marketing spin”
Underwriting agreement
Sets forth the terms of the purchase and sale of securities between the underwriters and the issuer (and selling shareholders)
Entered into after effectiveness of the registration statement and on “pricing” day, although negotiated well in advance
Sets forth pricing terms, representations and warranties of the parties and required legal opinions
Drafted by underwriters’ counsel

12. Overview of Offering Process -- Underwriting
Enter into an underwriting agreement on the day of the “pricing” of the offering
Firm commitment underwriting (typical):
Underwriters, as principals, agree to purchase a specific amount of securities for resale to the public
Underwriters assume the risk of resale for typically 2 business days
Underwriters purchase the securities from the issuer or selling shareholders at a discount to the sale price to public
~1% to 3% for debt
~6-7% for an IPO
~5% for secondary offering
Best efforts underwriting:
Underwriters, as agents of the issuer, agree to use their best efforts to sell the securities to the public
Underwriters do not assume the risk of resale
Issuer and underwriters agree on min/max amounts to be offered

13. Overview of Offering Process -- Lock-up and Comfort Letter
Lock-up agreements
Typical in equity transactions, less prevalent in debt transactions
Issuer, issuer’s officers and directors and selected shareholders agree, subject to limited exceptions, not to dispose of or hedge any of their securities during a specified period after the offering without the prior consent of the underwriters
The typical lock-up period is 180 days for IPOs and 90 (sometimes 45) days for subsequent offerings
Comfort letter
A letter from the issuer’s auditor addressed to the underwriters and typically issuer’s board
Comfort letters require the issuer’s auditors to review the financial information in the registration statement and to report the results of this review to the underwriters (an independent verification of certain financial information)
Comforted data must be derived from financial records of the issuer that are subject to accounting controls
Serves to evidence the underwriters’ due diligence defense under Section 11 of the Securities Act
The form and content of comfort letters are governed by the AICPA’s auditing standards

14. Overview of Offering Process -- Legal Opinions
Addressed to the underwriters from the issuer’s counsel and underwriters’ counsel
Also serves to evidence the underwriters’ due diligence defense
Covers many of the matters in the issuer’s representations and warranties from the underwriting agreement
Validity of the securities to be issued
Counsel’s “10b-5” or “negative assurances” statement guides much of their behavior during the offering process
No untrue statements or omissions of material facts

15. Initial Offerings -- Three Distinct Time Periods
Pre-submission/filing period
Begins with the decision to pursue a public offering, followed by organizational meeting
If an EGC, pursuant to JOBS Act, may meet with qualified institutional buyers and institutional accredited investors to “test the waters” and gauge investor interest prior to filing of registration statement
Waiting period
Begins with confidential submission / filing of the registration statement
If an EGC, test the waters communications may continue, written offers may also be made pursuant to a preliminary prospectus
Post-effective period
Begins when the registration statement is declared effective
Sales may be completed
NOTE: Publicity restrictions apply during each period (see Annex B)

16. Key Tasks During Pre-submission / Filing Period
Select Underwriters – “Bake-off” process
Selection criteria: reputation, quality of research analysts, distribution capabilities and after market support
Designate lead bookrunner
Determine compensation split
Provide input on underwriters’ counsel selection
Be mindful of FINRA issues related to communications with analysts during solicitation period
Determine underwriting arrangements
“Green shoe”; typically 15% of shares to be sold
Underwriting discount; typically 7% for an IPO; 5% for follow-ons
Resolve who will participate
Registration Rights
Practical Considerations for Shareholders and Employees
Primary / Secondary Split

17. Key Tasks During Pre-submission / Filing Period
Prepare registration statement
Strengths and strategies
Identify key risks
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Compensation Disclosure (consider sensitivity around disclosure)
Resolve capital structure issues
Determine whether amendment or replacement of debt facilities will be necessary
Determine any necessary reorganization and / or use of Up-C structure
Any preferred stock issues and management agreement terminations
Stock split
Consider “corporate housekeeping issues”
Additional senior management
Additional financial reporting, legal, accounting or internal audit personnel
Board composition and structure (additional independent directors, timing of any resignations, staggered board)
Shareholders agreements / controlled company exemption
Executive compensation program review
Post-IPO executive officer and director compensation

18. Key Tasks During Pre-submission / Filing Period
Underwriter business and accounting due diligence
Interview key employees (e.g., CEO, CFO, COO, etc.)
Site visits
Subject matter diligence
Interview certain key customers/suppliers
Review management’s financial projections
Ask questions of independent auditors
Legal due diligence
Underwriters’ counsel presents due diligence request lists (similar to version included in this package)
Identify disclosure issues such as pending litigation, intellectual property matters, regulatory matters, etc.
Review board minutes
Capitalization diligence
Related party transactions
Determine S-1 exhibits

19. Key Tasks During Pre-submission / Filing Period
Identify Key Accounting Issues
Timing and financial statement requirements / staleness / re-audits
Any acquisition financials or pro formas
Cheap stock issues / timing of any new grants
Confirm auditor independence (including Sponsor analysis)
Negotiate underwriting documentation
Underwriting agreement
Comfort letter (will be negotiated between underwriters’ counsel and accountants)
Lock-up agreements (see Annex C)
Reserve Ticker Symbol
Reservation with either exchange holds for both
Valuation issues:
Identify comparable companies
Valuation is function of a multiple of next year’s projected earnings
Anticipated price range for the securities

20. Key Tasks During Pre-submission / Filing Period
Pick other members of the “Team”
NYSE / Nasdaq (work through listing process and select specialist for any NYSE listing)
Financial printer
External PR/IR function
Transfer agent
Insurance broker
Compensation consultant
ECM Consultant (e.g., Solebury Capital)
Meet with equity analysts
Analyst day with analysts for all syndicate members
Evaluate timing for sharing financial forecast

21. Key Tasks During Waiting Period
Receive and respond to SEC comments on the registration statement
Likely to involve multiple amendments submitted to or filed with the SEC
Will need to update financials throughout process
Registration statement must be filed (along with previous amendments) at least 21 days prior to launch of road show
Last amendment prior to launch will include price range
Prepare and conduct “roadshow”
Members of senior management will participate
Underwriters and management prepare slide deck; must be consistent with the preliminary prospectus; discuss long-term targets slide
No written material can be used except the preliminary prospectus
Roadshow will likely begin shortly before effectiveness, but SEC will have confirmed clearance
Typically on road for about 7 days
Prepare governance documents
Articles, bylaws, committee charters, etc. (discuss state of incorporation and corporate opportunities statute)
Equity compensation plan
Any post-IPO registration rights or shareholder agreements

22. Key Tasks During Post-effective Period
Submit preliminary range and/or “cheap stock” letter to SEC
File Form 8-A
34 Act effectiveness
NYSE/Nasdaq certification for listing
Registration statement declared effective
Price offering
Negotiated by company and underwriters based on investor demand
Consideration given to after-market performance
File Form 3s with SEC for directors, officers and 10% holders
Prepare final prospectus
Will include final pricing
Filed with SEC
Close the offering
Typically occurs 2 business days following pricing

23. Timing of Shelf Takedowns
Once a shelf registration statement is on file, offering securities pursuant to the shelf can be a rapid process
Includes a “base prospectus”
Pricing information can be filed in a free writing prospectus
Prepare prospectus supplement
File within 2 business days of pricing
Closing can occur as soon as 2 business days following pricing (used to be 3)
The time necessary to conduct due diligence and draft the prospectus supplement may extend the otherwise rapid takedown process of a shelf registration

24. Forms and Disclosure
Primary content is the prospectus, which includes detailed information about the issuer and the offering (See Annex C)
Also includes undertakings, signatures of officers and directors and exhibits
Registration statement forms may be thought of as checklists which indicate the items of information that must be disclosed
Substantive information requirements are found in Regulation S-K

25. Forms and Disclosure Form S-1 (typical IPO form)
Used when no other form is authorized
Generally for issuers who have not been reporting under the Exchange Act for preceding 12 months
Incorporation by reference permitted for previously filed SEC reports and “forward incorporation” permitted for smaller reporting companies per the FAST Act

26. Forms and Disclosure Form S-3
Issuers can have a public float of less than $75 million and register offerings on Form S-3, as long as:
They satisfy the other eligibility requirements of Form S-3 (e.g., timely reporting for 12 months)
They have a class of common equity listed on a national exchange
The issuers do not sell more than 1/3 of their public float in primary offerings over a 12-calendar-month period preceding the filing
They are not shell companies
Backward and forward incorporation by reference permitted
For well-known seasoned issuers ($700 million in public equity float (i.e., voting stock held by non-affiliates)):
Registration statement automatically effective (no SEC review prior to effectiveness)
Need not register a specific amount of securities and can add classes of securities at any time prior to sale by means of a post-effective amendment

27. Forms and Disclosure Form S-4
Available when a company is issuing securities in the following types of transactions, among others:
Certain mergers
Exchange offers for securities of the issuer or another entity
A public reoffering or resale of any such securities acquired pursuant to the registration statement
Allows incorporation by reference if the company meets the requirements for use of Form S-3
Registration statement often includes combined proxy statement and prospectus

28. Forms and Disclosure Form S-8
Used to register offerings pursuant to employee benefit plans
Covered plans may include:
Stock incentive plans
Employee stock purchase plans
Deferred compensation plans
401(k) plans
Available for non-shell company issuers that have been compliant with the reporting requirements of the Exchange Act for the preceding 12 months
Backward and forward incorporation by reference permitted
Prospectus providing a description of the plan is not included with the filed registration statement but distributed to participants

29. Forms and Disclosure Typical exhibits Underwriting agreement
Articles of incorporation and bylaws
Form of the security and indenture
Opinions regarding legality of securities and tax matters
Material contracts
Statements regarding computations
Subsidiaries
Consents
Powers of attorney
Note: CEO and CFO certifications do not apply to registration statements

30. Questions

31. Annex A: Typical IPO Execution Overview
The IPO process typically takes 4-6 months from start to finish
Typical SEC review process (2-3 months)
SEC review is longest and most unpredictable aspect of IPO process
Closing
Executing
Complete closing mechanics
Establish investor relations function
Begin executing on public company strategic plan
Research analyst coverage
Marketing
Roadshow
U.S. cities
International leg
Bookbuilding
Pricing
Allocation
Waiting
Develop marketing plan
Management
presentation
Sales force memo
Investor targets/mix
Receive SEC clearance
Publicly launch transaction
Implementing
Co-manager diligence
Respond to SEC
comments
File amended S-1 and previous amendments with SEC
Update financials (as necessary)
Complete corporate governance tasks
Planning
Draft Registration Statement on Form S-1
Strengths/Strategies
Business Section
Risk Factors
Prepare financials
Conduct financial, business and legal due diligence
Confidentially submit Initial S-1 to SEC
File NYSE/NASDAQ Application
Engage in "testing the waters" communications, if desired
Develop strategic plan
Analyze different alternatives
Define the timetable
Appoint advisers
Resolve capital structure issues
Evaluate potential IPO accounting issues
Start acting like a public company
Consider "testing the waters“ (if EGC)

32. Annex B: Publicity Restrictions
Oral and written offers of any kind are prohibited prior to filing the registration statement, subject to important safe harbors, including “testing the waters” communications pursuant to the JOBS Act
The objective is to avoid stimulating investor interest prior to an opportunity to see the legal selling document (i.e., the prospectus) – do not affirm rumors regarding a potential IPO
“Offer” is construed broadly
Includes any publicity or disclosure which has the effect of conditioning the public mind or arousing public interest in the issuer or its securities
Pre-30 day safe harbor: All company communications, even if a technical “offer,” more than 30 days prior to filing the registration statement are permissible
Must not refer to the offering
Company takes reasonable steps within its control to prevent further distribution/publication during the 30-day pre-filing period
Factual business information safe harbor: Subject to certain conditions, the regular release of ordinary course factual business information is permissible during the pre-filing period and at any other time in the offering process
Forward-looking information is not protected
Pre-filing announcement: A company may make a limited announcement of the proposed offering prior to filing a registration statement that contains no more than specified basic information and without naming the underwriters
Pre-Filing
Restrictions
Pre-Filing Safe Harbors

33. Annex B: Publicity Restrictions
Written offers can only be made pursuant to a preliminary prospectus or, in limited circumstances, a “free writing prospectus,” excluding “testing the waters” communications
Oral offers are permitted
Factual business information safe harbor continues to apply
Post-filing announcement: A company may make a limited announcement of the proposed offering after filing a registration statement that contains no more than certain specified Rule 134 information
The publicity constraints described above continue for a 25-day period following the effective date of the registration statement
Counsel should review the company’s website for “offers;” the SEC views website and information accessed by hyperlinks as written statements by the issuer
Impermissible s to employees or articles may have to be filed with the prospectus
SEC could require a company to engage in a cooling-off period
Waiting Period
Restrictions
Post-effective
Restrictions
Practical Considerations
What Could
Happen?

34. Overview of an IPO Lock-up Early Lock-up Release Considerations
Annex C: IPO Lock-ups
A standard lock-up of 180 days will be required in an IPO, but there is the potential for an early lock-up release
Overview of an IPO Lock-up
Purpose of lock-up is to keep share price volatility resulting from new investor liquidity down as the IPO shares trade into a natural volume
Upon lock-up release typical for increased share price volatility for a short time
Standard lock-up of 180 days for pre-IPO shareholders including management and board
Carveouts are standard for:
10b5-1 plan establishment (no sales)
Acquisitions up to a specified cap
Deviation from standard lock-up has the potential to raise investors attention and noise to the IPO marketing
Business performance / execution since IPO
Important to properly manage expectations and communication to the Street
Under promise and over deliver based on analyst model
Price appreciation: Important signal to price a secondary offering above the IPO price
Public investor interest in added liquidity
Rationale for selling: Consideration should be given to tenure of investment and rationale for selling
Market conditions: Similar to IPO considerations
Early Lock-up Release Considerations

35. Annex D: Prospectus Contents
Information about the offering:
Description of the securities being offered
Use of proceeds
Plan of distribution
Names of underwriters
Underwriters’ compensation
Determination of offering price (in an IPO)
Dilution information

36. Annex D: Prospectus Contents
Information about the company:
Description of the business and properties
Description of pending legal proceedings
Stock market and dividend information
Selected financial data
Management’s discussion and analysis of financial condition and results of operations (MD&A)
Management information
Compensation information
Related party transactions
Financial statements