Direct public offering is an equity offering in which the company’s shares of stock are sold directly to investors, rather that through an underwriter. This eliminates the cost associated with an underwriter as well as the need to file the securities with the Securities Exchange Commission. This is done to raise capital for new companies and is an alternative to debt financing where a company borrows money from investors rather than selling them stake in the business.
Direct public offering are fairly different from the more popular IPO’s (initial public offerings) and other forms of early financing such as venture capitalists and angel investors. It is a small mixture of each of these forms of financing but combines other elements that can benefit your business. DPO’s are security offerings that are registered with state administrators. The procedure involved with a DPO is much simpler and less expensive that standard registration with the SEC. DPO’s allow small businesses to be equal with larger corporations in terms of access to capital markets.
There are three main types of classifications for DPO’s: Regulation D offerings, Regulation A offerings, and intrastate offerings. The most popular is the Regulation D Section 504 in which companies can raise around 1 million every year by registering with state securities administrations. A regulation A offering increases the size of capital to 5 million, but you must also register your business with the SEC small business office. Intrastate offerings have no limits.