![]() ![]() the aggregate legal and accounting expenses incurred in connection with a Form 10 IPO will likely be as much, if not more, than those associated with a traditional IPO.if the company’s stock trades below $5.00 per share and is not listed on a national securities exchange, the company will be subject to the SEC’s “penny stock” rules, which could make it more difficult for broker-dealers to execute trades in the stock.the elapsed time from the sale of the securities to trading on a stock exchange-the ultimate goal in a Form 10 IPO-may be no shorter than in a traditional IPO.the company may encounter difficulty in satisfying the public float and round-lot stockholder requirements for stock exchange listing.it may be difficult for a smaller company to comply with its public reporting obligations under the Exchange Act, which become applicable as soon as the Form 10 becomes effective.While these advantages may be very meaningful for some companies, there are also several disadvantages to a Form 10 IPO, including: much of the time, cost and expense associated with public company preparations can be deferred until after the company has received the capital.institutional investors that ordinarily invest only in public companies may be willing to invest in a Form 10 IPO private placement and.the SEC review process does not occur until after the sale of the securities.the price at which the company raises capital is negotiated up front with the investors in the private placement. ![]() The following aspects of the Form 10 IPO process contribute to its advantages: The principal advantage of a Form 10 IPO is that it can provide a company with significant capital more quickly than a conventional IPO. Typically, a Form 10 IPO company will arrange to have its stock quoted on an over-the-counter market and later seek to have its shares listed on a national securities exchange once it satisfies the applicable listing standards. In a Form 10 IPO, a private company sells securities in a private placement under Regulation D and, in connection with the private placement, agrees to file a Form 10 registration statement to become a reporting company under the Exchange Act and to file a Form S-1 registration statement registering for resale the shares sold in the private placement. Following the adoption of tightened stock exchange listing standards for reverse-merger companies, the Form 10 IPO has become a more desirable alternative. Previously, various forms of reverse-merger transactions had been the primary means for life science companies to go public if they could not complete a traditional IPO. In response to these factors, the Form 10 IPO has emerged as an alternative to a conventional IPO. In addition, it can be challenging for companies with limited operating histories to gauge their valuations, even as late in the process as during the road show, causing some companies to price their IPOs well below the estimated range, or even to abandon the effort despite having already invested significant time and expense in the process. Given the length of time it takes to complete the overall IPO process, there is significant risk that market conditions will change between the time a company begins the process and the time it is ready to market the offering to investors. The traditional IPO route can be difficult. Although not an IPO in the usual sense, a Form 10 IPO may be the most practical route to going public for some companies. A new kind of IPO structure, called a “Form 10 IPO,” can provide an alternative path to capital and public trading for smaller companies without significant revenue in high-risk industries, such as life sciences. ![]()
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