1. Concept

Under securities law, a public offering is an offering of securities to a large number of investors excluding professional investors or using advertising methods or public solicitation when offering.

2. Forms of offering securities to the public

Initial offering: newly established companies, equitized companies

• Initial public offering of shares to raise additional capital for the issuer
• Initial public offering of shares to become a public company through changes in ownership structure but without increasing the charter capital of the issuer;
• Combine the above two forms;
• Initial public offering of fund certificates to establish a securities investment fund.

Additional offering: public companies increase charter capital, raise capital by issuing bonds

• The public company offers to sell additional shares to the public or issues the right to buy shares to existing shareholders;
• The securities investment fund management company offers to sell more fund certificates to the public to increase the charter capital of the Investment Fund.

3. Characteristics of public offering

• The offering of securities to the public is wide-ranging (wide-ranging in nature). Scale is expressed in specific aspects such as: offering securities to a large number of investors; large offering volumes; use advertising methods or broad solicitations in public offerings.
• In principle, registration with competent state agencies when offering securities to the public is a mandatory legal procedure. Therefore, the offering shall be made only after the issuer has registered the offering with the competent state agency in charge of the securities market.
• The entities offering securities to the public are very diverse, be it businesses, the Government or local governments.
• The purpose of an initial public offering of securities is to raise medium- and long-term capital.
• An offering of securities to the public must meet the conditions and comply with the process prescribed by law.
• The offering is usually conducted through intermediaries who are underwriters or securities issuing agents.
• The offering was made on a large scale; attract a large number of investors to invest capital to buy securities in the issuance.
• The total value of securities offered for sale usually has to reach a certain level in order to concentrate a large amount of capital, helping the issuer to implement new business expansion or investment projects.

Today, in practice, for the economy and society, offering securities to the public is important. The offering of securities to the public will bring the necessary capital to contribute to promoting socio-economic development. As for the stock market, offering securities to the public is an activity that directly affects the existence and development of the stock market.

Offering securities to the public can be said to be the supply of goods to the market. After being offered to the public, securities are often widely traded, can be bought and sold easily. At that time, the new stock market can promote its role as a channel to mobilize and allocate the main capital of the economy.

For corporate issuers, offering securities to the public is considered a very important capital mobilization channel to help enterprises solve capital needs while avoiding excessive dependence on credit capital of financial institutions. In addition, offering securities to the public can increase the value of the business.

Above is the content of KALF’s advice on the form of offering securities to the public and some related legal issues. All of our above advice opinions are based on applicable legal provisions. If you have any questions or requests about legal issues, please contact us for timely answers.