Raising Capital

Any attempt to raise investment capital by the offer and sale of securities in the U.S. market must be made with a publicly filed registration statement pursuant to section 5 of the U.S. Securities Act of 1933 (the “Securities Act”), which governs the initial issuance of securities, unless an exemption from registration is available.  Exemptions from the registration requirement are valuable because the registration process, especially for an initial public offering (“IPO”), is costly, rigorous, and leads to extensive ongoing compliance obligations under the Securities Exchange Act of 1934 (the “Exchange Act”), which regulates both offers and sales of securities after their initial issuance and the reporting obligations of public companies.

Exemptions from the registration requirement fall into two categories:  securities that are always exempt from registration pursuant to section 3 of the Securities Act (for example, government securities and short term commercial paper), and certain transactions in securities that are not themselves generally exempt from registration requirements, but which for that specific transaction are exempted pursuant to section 4 of the Securities Act.

For most companies attempting to raise capital without public registration, the most important section 4 exemption is section 4(a)(2), which exempts from the registration requirement the sale of securities by a company or “issuer” “not involving any public offering,” meaning in practice a “private placement” of the securities.  Section 3(b) provides another route for issuers to offer exempt securities (as opposed to exempt transactions in securities) when the aggregate amount and nature of the offering is limited.  Registration-exempt securities offerings can be made pursuant to the relevant Securities Act provisions themselves, and also pursuant to rules and regulations promulgated pursuant to the Securities Act by the U.S. securities regulatory agency, the Securities and Exchange Commission (“SEC”), such as Regulation (Reg.) D, Reg. A/A+, Reg. S and Reg. CF (Crowdfunding).

Raising Capital Solutions:

We represent businesses seeking to raise capital to fund growth and operations, and investors and lenders to those businesses, including private equity firms, venture capital firms, hedge funds, family offices and trusts in:

  • Equity and Debt Securities Public Offerings
  • Private Placements pursuant to Reg. D, Reg. A/A+, Reg. S, Reg. CF, Securities Act section 4(a)(2) and others
  • SPAC (Special Purpose Acquisition Companies) IPOs and Reverse Merger Transactions
  • Bridge and Mezzanine Lending
  • Resales of Restricted and Control Securities pursuant to Securities Act Rules 144, 144A and 145
  • PIPE (Private Investment in Public Equity) Transactions
  • Securities Issuance in M&A Transactions

Raising Capital Representative Transactions

Raising Capital Whitepapers and Advisories:

Raising Capital Through Private Placements: Deal Points

Raising Capital Through Private Placements Exemption Chart

Deal Points Short Takes 2022.01 Use a Private Placement Memorandum

“Raising Capital” compares in detail Regs. D, A/A+, S, Crowdfunding and other principal Securities Act sections, rules, and regulations that may be used for public registration-exempt offers and sales of securities for the purpose of raising capital and discusses their respective uses, requirements, advantages, and disadvantages.  Appendix 1 at the end presents a condensed version of the same information in chart form, which you may also download as a standalone document.  Following the discussion are “Deal Points” to aid the capital raising process: what to do, and especially what not to do.

SPACs: An IPO and Private Equity Alternative: Deal Points

SEC Proposes New Rules to Enhance SPAC Disclosure and Investor Protection

SPACs – Special Purpose Acquisition Companies – are “blank check” companies – shell companies without an operating business – formed and taken public in an IPO for the sole purpose of acquiring an operating business, usually a private company, with the IPO proceeds and sometimes additional private equity investment.  In 2020, 248  SPACs were launched in the U.S., raising over $83 billion.  The financing trend is only accelerating, with 613 SPACs launched in 2021, raising over $162 billion.

Resales of Restricted Securities: Deal Points

Securities issued pursuant to most of the exemptions from public registration pursuant to Securities Act section 5 are in most cases “Restricted Securities,” which may not be resold freely like securities issued in an IPO.  For example, securities issued pursuant to the most frequently used Securities Act exemption, Regulation D, are Restricted Securities.  Securities issued under Securities Act exemptions may be registered under the Exchange Act and then freely resold.  However, just as for initial issuance of securities, there are Securities Act exemptions that permit resale of Restricted Securities without registration under the Exchange Act, and which therefore provide liquidity to holders of those securities.

SEC Rule 148: The New Exception to the General Solicitation and Advertising Prohibition When Raising Capital Through Private Placements

SEC Charges Three Companies $539 Million for Illegal General Solicitation



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