Source: Adapted from questions developed by Drew Field of Drew Field/Direct Public Offerings, San Francisco.
The SCOR Board
Number of direct public offerings in the United States
1989: 10
1990: 9
1991: 46
1992: 109
1993: 213
1994: 267
1995: 253
1996: 163, in first six months
Source: Tom Stewart-Gordon, the SCOR Report, Dallas.
Diary of a DPO
Think selling stock is a picnic? Think again. Here's the story told by Michael Quinn, owner of Hahnemann Pharmacy, a small 11-year-old homeopathic pharmacy in Albany, Calif. Quinn sought to raise money to add a laboratory to his company, which in 1995 had sales of $590,000 and net income of $62,000.
JULYAUGUST 1994: Quinn meets with lawyer-marketer to discuss offering and with accountants to begin first independent audit. Starts preparing offering documents. Works 10 hours a week on project. Money spent: $8,000 in legal and accounting fees.
SEPTEMBEROCTOBER: Prepares copies of offering materials, talks to consultants. Works 20 hours a week on DPO. Money spent: $14,000 in legal and accounting fees.
NOVEMBER: Prepares pro forma financial estimates for next five years for SEC. Develops marketing plan. Accountants review most recent quarterly financials. Money spent : $9,500 in legal and accounting fees.
DECEMBER: Submits documents to SEC and California Department of Corporations (CDOC). Spends two weeks fielding SEC and CDOC requests. Gets SEC approval and is ecstatic over fast turnaround. First batch of prospectuses goes to printer. Money spent: $4,000 in legal fees.
JANUARY 1995: Meets with banker to set up escrow account to hold investors' money (to be returned to them if offering fails to reach its minimum goal by June 30). Mails out first 300 prospectuses in California. Begins filing in other states. Pays New York State $1,000 to file, and most other states from $50 to $100. Works with lawyer to figure out state regulations. Until August, spends 20 to 30 hours a week talking with potential investors. Gets first two investors, both local homeopathic doctors. Money spent: $6,000 on marketing.
FEBRUARY: Sends out 3,000-piece mailing that announces offering to recent customers. Gets roughly 200 phone calls and faxes in response. Hires part-time pharmacist to help out in the store. Gets five more investors. Company has raised $22,000 after six weeks of marketing. Money spent: $8,000 on marketing and $600 a week for the new employee.
MARCH: Sends out 10,000-piece mailing. Escrow account is up to $43,000. Money spent: $10,000 on marketing.
APRIL: Prints poster and mail-order inserts. Exchanges mailing lists with other organizations and sends out 10,000-piece mailing. With only $78,000 in escrow, Quinn asks SEC for an extension of June 30 deadline. Accountants update financials. Money spent: $9,500 on marketing and accounting fees.
MAY: Sends out another 10,000-piece mailing. Company now has $102,000 in escrow. Money spent: $4,000 on marketing.
JUNE: With Hahnemann $298,000 short of its minimum goal, Quinn receives extension from SEC. Sends out 2,200-piece mailing. By June 30 has $225,000 in the bank. Calls people to get them to mail checks and fax in subscriptions. Sends extension-agreement forms to 102 investors and tracks down those who are on vacation. Money spent: $6,000 on marketing.
JULY: Exhausted, Quinn takes a week off to celebrate his father's 80th birthday. Returns and is inundated with calls and letters. Raises a total of $272,000 by end of month. Money spent: $4,000 on marketing.
AUGUST: Quinn thinks he's over the hump. Then potential investor who had pledged $50,000 backs out. Shocked, Quinn launches a telephone campaign. Everyone at the pharmacy spends a few hours each day, including Saturdays, calling people who had requested prospectuses. Some people invest for the second or third time. Quinn works full-time on offering for the entire month. Money spent: $6,000 on marketing.
AUGUST 28: With four days left, Quinn has $319,000 in the bank. He drives with his wife from Albany to bank, in San Francisco, to hand-deliver $20,000 worth of new checks.
AUGUST 29: With checks and calls still coming in, Quinn returns to bank with another $25,000.
AUGUST 30: Quinn again drives to San Francisco, with another $27,000 worth of new checks.
AUGUST 31, 1995: With $391,000 in the bank, Quinn runs another $10,000 back to bank at 9 a.m. Returns later the same day with $21,000 that had just arrived. With $422,000 in the bank, Quinn cracks open a bottle of champagne.
POSTSCRIPT: Over the next six weeks an additional $45,000 rolls in, bringing offering total to $467,000. Money spent: $14,000, in last payment to lawyer.
