Tip of the Week: How to Get Trading in a Self-Filing

As noted in my book, if you choose to file your own Form S-1 or Form 10 to take your private company public, when that registration is completed, the company is public.  No IPO.  No reverse merger with a shell.  Financing has been obtained either before or right after the filing becomes effective. Under a year old interpretation, under many circumstances money can be raised while the registration is pending.  There are now enough shares in the public float to qualify for, say, the OTC Bulletin Board, which unofficially requires at least thirty-five to forty non affiliate shareholders with at least one hundred tradable shares (Note: This requirement is not on any official list of rules, but as a practical matter the regulators will bury your application to trade if you do not meet this criterion.)

All that’s missing is a listing on an exchange or market, without which the shares may not be traded through brokers.  On the Pink Sheets and OTC Bulletin Board, the company cannot apply for a listing, a broker-dealer serving as market maker must do so.  On the Nasdaq, NYSE Afternext and NYSE Euronoext (formerly the American Stock Exchange, and the New York Stock Exchange respectively), companies apply for listing, not market makers.

Most companies going through a self-filing do not yet qualify for the higher exchanges, so market makers will be needed to get trading going.  I generally recommend that a company encourage market makers to start the application process while the Form S-1 or Form 10 is pending so as not to waste time.  The process of getting approved can take a few months, so the sooner the process starts the better.

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