Entering the Public Securities Market

This information is provided for general informational purposes only and should not be relied upon as legal interpretations by the Office, shall not supersede any part of the Florida Statutes or Florida Administrative Code, and does not constitute legal or financial advice. The Office does not endorse any third-party or guarantee the accuracy of any third-party information linked to or referenced herein.

Entering the public securities market provides a company with an infusion of capital by selling shares to the public. This is a significant step for a company, typically one that is in a late stage of development and mature in its operations. 

Reasons for entering the public securities market

A company many enter the public market to raise additional capital, provide liquidity to investors, garner additional market demand, expand operations or provide various ownership interests to employees.

Early-stage investors who participated in a company’s private offering often look for an exit strategy in a company’s business plan. An exit strategy is a plan under which a company’s owner and/or investors may liquidate or sell their stake. Entering the public market provides a traditional means for investors to freely sell their stake in the company to another buyer. 


Alternatives to Entering the Public Market

Companies can also offer liquidity to investors through strategic transactions with another public or private entity that may, or may not, require the issuance of new securities. Securities of privately held companies can only be resold to another investor and these transactions must be registered or qualify for an exemption from registration. Below are a few examples of strategic corporate transactions that can offer liquidity to early-stage investors.

  • Acquisition – The entirety of a company's equity is bought out by another company or investor, allowing existing investors to sell their shares to the buyer. 
  • Management Buy Out (MBO) - When a corporate manager or team decides to buy all outstanding shares from the business owners for financial gain, greater control, or management restructuring.
  • Private Equity (PE) – A PE firm may decide to acquire and manage a private business with the intent of growing the company and selling it later for a profit.
  • Merger – The entirety of the company's equity is bought out, and the company is integrated into the buyer's existing business.
    • Reverse Merger - A private company purchases all or most of the equity of an already publicly traded firm or shell company, resulting in a new publicly traded entity.

When deciding whether to go public, a company should consider many factors including the following:

  • Does the company’s management team have the necessary experience?
  • Will there need to be changes to the company’s corporate governance?
  • Can the company demonstrate a history of revenue growth and profits?
  • Will the company’s record keeping policies and accounting practices need to be amended to meet reporting requirements?
  • Where will the company’s securities be listed for public trading?
  • Is the company prepared to invest the time and resources necessary to take the company public?
  • Will there be demand for the company’s securities?

A company that wishes to offer securities to the investing public through a registered public offering will be required to file a registration statement with the SEC before it may offer its securities for sale. These securities cannot be sold until the SEC declares the registration statement effective. Much of a company’s proprietary information will be made available to the investing public upon an effective registration.

Upon a registration statement becoming effective, a company may become subject to Securities Exchange Act of 1934 reporting requirements. This requires extensive and regular disclosure of financial, operational, corporate governance, and management information about the company to the public and can mean significant ongoing legal, accounting, marketing, and underwriting costs. This can also mean an increased liability for non-compliance and significant time and resources to ensure due diligence is completed.

To assist with these responsibilities, companies contemplating an offering of securities through a registered initial public offering should consider the following:

  • An agreement with an underwriting institution who will facilitate the sale, price, and amount of the newly issued securities.
    • Underwriters will also work with other transfer agents and registrars to manage investor relations, communications, proxy voting, and record keeping of the company's ownership. 
  • An accounting service who will prepare audited financial statements.
  • Legal services who will prepare an offering prospectus, advise on compliance and perform due diligence and file a registration statement with the SEC.
  • An established board of directors who approve to take the company public.

The following are common ways a company can enter the public market through a registered public offering of securities:

  • An initial public offering (IPO) – a company, in partnership with an underwriter, sells newly issued shares to the public.
  • A national exchange listing – a company allows its existing shareholders to sell its shares directly to the public by listing them on a national exchange.
    • National exchanges have standard requirements and qualifications for securities to be listed and traded.
  • Over-the-Counter Bulletin Board quote – a company, in partnership with a broker, sells its securities through a regulated quotation system.


What is a Special Purpose Acquisition Company (SPAC)?

A SPAC, also referred to as a “blank check company,” usually is a corporation having no operations and is formed by IPO investors and/or sponsors with the sole purpose of acquiring or merging with a private corporation or company. SPACs are a vehicle for transitioning a private corporation to a publicly traded corporation.

Other Resources