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Public Offerings: On the Cheap

The difference between a "Form 10" offering and an IPO are discussed by an investment banker.
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Most public offerings come under the laborious provisions of the Securities Act of 1933. There's also an Act of 1934, whose Form 10 provides a shortcut. As one practitioner, Boston investment banker Fechtor, Detwiler vice-president Joel F. Johnson, describes it, "Form 10 permits a private corporation to declare itself public without an expensive underwriting and a grueling road show." The method is so seldom used that when a local company proposed it, Johnson had to dust off his texts to determine how to proceed. Here's what he found:

"Instead of being an offering-registration statement, it's a trading-registration statement. You tell the Securities and Exchange Commission you're not raising capital, but that you're registering shares that are currently outstanding so they'll be free to trade. The shareholders sell stock, and a public market is then created so the company can later do a secondary offering."

There are restrictions on the sellers, but the tactic is less time sensitive than a full-blown offering -- and far cheaper. In 1990 Fechtor, Detwiler executed a Form 10 by buying stock from then-private Massachusetts power-supply-maker Vicor at $7.50 a share. Fechtor, Detwiler resold the shares to its retail customers and became the stock's market maker, opening it to public trading. The following year Vicor, listed as VICR on NASDAQ, sold shares in a public offering at $34 each. Within weeks, the price topped $45. -- Robert A. Mamis

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