1.4 Offerings

One decision opens every offering: register it, or find an exemption from registering it at all. The registered path runs one direction, on a fixed timeline. The issuer files a registration statement; a cooling-off period follows, 20 days by default under Section 8-A, though the SEC may set it earlier, never later; the statement becomes effective, and the offering can sell; after that, the aftermarket, where a prospectus obligation can still follow the security for a stated number of days. A public offering is registered with the SEC and sold broadly with full prospectus disclosure; a private placement skips registration under an exemption, most often Regulation D, and sells to a limited, defined group instead.

Three offering types answer three different questions about who is selling. An IPO is the issuer's first-ever sale of stock to the public. A secondary offering is an existing large holder selling shares already outstanding; the issuer receives nothing new from it. A follow-on is the issuer itself selling more shares, after its own IPO. Who carries the risk if an offering does not fully sell depends on the underwriting commitment: in a firm commitment, the underwriter buys the whole offering and resells it, so any unsold shares are the underwriter's own loss; in best efforts, the underwriter only tries to sell, and unsold shares go back to the issuer instead.

The exemptions carry the numbers most worth holding onto. Regulation D Rule 504 caps the aggregate offering price at $10,000,000, measured on a rolling 12-month basis. Rule 506(b) allows no general solicitation but permits up to 35 non-accredited purchasers in any 90-day period; Rule 506(c) permits general solicitation instead, but only if the issuer takes reasonable steps to verify every purchaser is accredited. The two trade opposite things, not a letter change with the same substance: 506(b) trades no advertising for a small non-accredited allowance, 506(c) trades open advertising for a strict, verified-accredited-only buyer list. A resale exemption sits alongside the offering exemptions: Rule 144's holding period is six months if the issuer is a reporting company, one year if it is not, after which an affiliate's own volume is capped at the greater of 1% of the class outstanding or the average weekly trading volume over the prior four weeks.

Three documents do three different jobs during the same offering. The red herring, the preliminary prospectus, is used during the cooling-off period and carries no price yet. The final prospectus carries the price and ships with the security. A tombstone advertisement only announces the deal; it is not an offer to sell at all.