Raising Capital For Dummies by Joseph W. Bartlett & Peter Economy

Author:Joseph W. Bartlett & Peter Economy
Language: eng
Format: epub
Publisher: For Dummies

These factors need to be fleshed out with risks specific to the issue: environmental problems, the possibility of technical obsolescence, difficulties in procuring drug licenses from the FDA, and so forth. The specific risks should be cross-referenced and perhaps even repeated next to the statements they modify . . . in other words, whenever you boast that your technology is unique, a statement about potential substitutes needs to accompany your boast.

Substantive terms

Following the risk factors section, the PPM needs to set out terms (previously summarized) of the deal — for example, the special features of the securities being offered (preferences, voting rights, conversion privilege, dividends, and so forth), pricing terms (payable all at one time or in installments), and what the placement agent is being paid.

Many private-placement memoranda don’t include — in either the summary or the early discussion — an upfront disclosure of the expenses of the transaction, particularly the legal fees. That information usually can be determined from the pro forma financials, but straightforward disclosure also is necessary — even though embarrassingly high placement and legal fees may mean to the experienced reader that the offer is sticky and has been out on the street for a while.

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