Prospectus Writing

Prospectus Writing Services – Investor Offering Document Preparation

Private and Public Offering Prospectus Writing Services

A prospectus is a legal, formal document that companies must use if they want to raise capital from public or private investors. For the most part, these offerings have to be registered with certain securities regulatory bodies both in the state and at the national level. The documentation that the company must issue provides details about the type of securities they are offering, their target investors, and more. There are usually two kinds of prospectuses, the red herring which is also widely known as the preliminary prospectus, or the draft red herring. The second type of prospectus is known as the final prospectus, which is also known as the offering circular or a statutory prospectus.

What Prospectus LLC Can Do for Companies Pursuing a Private or Public Offering to Raise Capital

Here at Prospectus LLC, our team can help with any part of the offering process, from creating the prospectus to connecting you with our large network of broker dealers, attorneys, industry leaders, and more. Regardless of whether or not you want to conduct a private or public offering, our experienced team will make sure that your offering documentation is attractive, comprehensive, and well-written. The following is our basic seven step process:

  1. Prospectus LLC’s team will conduct the primary analysis of your business.
  2. We will recommend the best course of action, taking into consideration time frame, budgets and overall needs.
  3. We undertake all work and begin the process. This would include the drafting of the preliminary and/or final prospectus, or any other required documents, such as the private placement memorandum, or legal agreements and/or opinion letters from our attorneys.
  4. We send the documents to you for review.
  5. Once approved, and if you need, an attorney opinion letter can be included in the paperwork.
  6. If you require filing or registration with various agencies we will undertake as well.
  7. We are a start-to-finish firm and our number one goal is the successful growth of our clients.

Public vs. Private Offering Prospectus

The word prospectus is widely used for public and private offerings. Although it is an interchangeable terms, there is a correct usage. Normally, prospectus is mostly used for public offerings or the listing of securities on an exchange. Any business going public through an IPO has to draft a prospectus. On the contrary, in private placement, the term prospectus has also become widely used. Technically, the term to use in private placement is private placement memorandum (PPM), but it is also fine to use offering memorandum. While this is the case, most people still refer to private placement offering documentation as a prospectus. This is the most common term for a document that is written with the intent of obtaining funding from an investor. At Prospectus LLC, we help with both private and public prospectus writing across the globe.

Prospectus Writing for Offering Equity Securities

When it comes to equity securities, there are really only two options, to issue them publicly or privately. Equity takes the form of stock or shares and it represents a stake in the company that issued them. For the most part, any company that issues equity also writes an offering document such as an offering memorandum or a prospectus. The format of these documents change with different companies. When it comes to an offering, a company has to comply with local and federal regulations regarding the raising of capital. Thanks to our extensive experience, we are familiar with the regulations regarding public or private offerings on an international level.

Prospectus Writing for Debt Securities

Bonds and Notes

Aside from equity, the other type of security issued the most is debt. However, the writing of offering documentation for debt securities can be quite difficult. Debt securities are basically a businesses’ promise to return an investor’s capital at a specified date (maturity date) and with an extra interest payment (interest rate). The payment of this interest can vary, they can be paid out to investors on a monthly, yearly, or even biennial basis. The drafting of a prospectus is necessary when issuing debt securities. This is so the investor can gather all necessary information and make an informed decision about whether or not to invest. The difference between a note and a bond lies primarily on the length of the debt security. For the most part, a note has a maturity date that is under ten years. However, a bond can exceed ten years. In addition to bonds and notes, convertible debt securities also can be issued. Convertible debt is simply debt that can be converted to equity at a certain time or at the investor’s discretion.

Here at Prospectus LLC, our team can help you with any debt offering documentation needs. We are a global leader that focuses on the drafting of prospectuses in both the public and private sector, and other business legal documentation.

What Does a Preliminary Prospectus Include?

The preliminary prospectus contains essential information about a company and the security it is trying to issue. Some of this information includes the name of the company, the type of security, its starting price, and the number of shares available. This document also includes the type of offering, public or private, the underwriter’s fee for being the middle man between the company and its investors, and it also includes the company’s principals. There is also a small piece on the businesses’ financials, and whether or not the local regulator has approved the prospectus and its content.

Fees in a Prospectus

For the most part, mutual funds will charge fees that are restrained from the investors’ profits. These fees will be listed in a table towards the start of the offering document. Fees for the purchase, sales and transferring of securities between funds are also included. Any fund with over a 1.5% fee is considered high-cost, whereas most low-cost funds have fees under 1%.

Risks in a Prospectus

The point of a prospectus is to provide potential investors with a detailed account of the possible risks associated with buying securities from the issuing company. At the same time, this document also defends the company against possible future lawsuits brought on by investors who may claim that there wasn’t pertinent information in the offering document.

These risks and potential future conditions are provided early on in the prospectus, and there is usually a more detailed account further on. The date of the company’s inception, the experience of management, and capitalization of the issuer are all disclosed in the offering document. There is also a table that shows who already owns equity in the company, and it is an important piece of information because it tells prospective investors whether the principals are keeping their shares. If management is getting rid of their equity, there is most likely some kind of serious issue with the company.

Final Prospectus aka Statutory Prospectus aka Offering Circular

  1. The final version of a prospectusfor a public offering of securities. This document is complete in all details concerning the offering and is referred to as a “statutory prospectus” or “offering circular.”
  2. Because open-end mutual funds are continuously offering shares to the public, a fund prospectusis usually updated annually and made available to the public. Mutual fund prospectuses are all of the “final” variety.

BREAKING DOWN ‘Final Prospectus’

The key difference between the red herring prospectus and the final prospectus is that the red herring is not a verified document to sell securities. The final prospectus is verified and official and it actually contains the price point of the securities that are going to be sold by the issuer.

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