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Secondary offering / additional share float questions and referral request

My company went public many years back under different financial leadership. We are on a major exchange. We had some ups and downs and are now having some ups, happily. We are looking at various avenues for raising additional funds to help fuel our expansion. Floating additional shares is under consideration but I nor the folks on my team have done that before (and thus the anonymous posting). Looking for helpful insights on two fronts:

1) Things to keep in mind for secondary offerings / follow-on offerings. Having not done one before, what should I keep in mind at the front end of the process? What are the major legal issues? How do I best prepare for this? We are big4 audited but what will we need other than audited financials in terms of financial documentation and forecasts? etc., etc.. Any insights are welcome.

2) Who would you recommend as a banker for this? We're not with a top banking firm b/c we haven't had much need for many years. However, we're between $100M and $1B and growing well and am thinking that if we are going to make a change, now would be the time. Is it worth it going "name brand" with bankers? Who would you suggest we connect with? I'm getting input from many folks on this but would appreciate any additional insight.

Answers

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

Lucky you! I was involved in two secondary offerings which with the right timing and pricing were very beneficial in terms of
(i) raising additional cash for expansion and strategic purposes,
(ii) relieving residual overhang from from long term investor/shareholders anxious to sell to balance portfolios in line with, or beyond rule 144 limits, and
(iii) increasing the public float to provide more liquidty with better trading volumes and hopefully less volatility

A secondary S-1 can leverage all the work done for the initial offering S-1, although if, as you say, many years have passed, it could be that you may have to start again from scratch given changes in reporting requirements and your business and outlook since the IPO. The IPO market has been tough lately, but since your company is aready public, with an existing investor book, and since you have an established and growing business trend (hopefully profitable) I believe this should be an attractive proposition for investors, and that you should not have much difficulty in finding bankers to underwrite your offering. My main consideration is what kind of analyst support you will have for the stock after the offering. I dont believe bankers are allowed to discuss this these days(with segregation of banking and anlsyst services), but you need to be satisfied which plan offers the best prospects for you.

On selecting a banker, I am sure you will have a great choice. If you have had an existing relationship for many years one might hope that you feel confident in discussing your plans with them. However, while you may not have thought you had much need for banking services, I would have expected your relationship banker to have continued to provide banking support, presenting suggestions, M&A opportunities, funding ideas etc, even though you may not have been actively looking. If they havnt, then maybe the benefits of continuity, corporate instititional knowledge and relationships are not worth so much. In any case shop around. The banking world has changed greatly since the good old days went you went public.

You have a huge question and this is a small reply box. I suspect your question will stir up much response. I will be happy to add more later.

Anonymous
(Consultant) |

Remember that, from the prospective of the investment banker, there are four steps to any transaction: 1) get the deal; 2) get the deal; 3) get the deal; 4) figure out how to get it done. Remember, too, that bankers deal with sell-side clients like you every once in a while. Their firms work with the buy-side people every day.

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