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What Is a Direct Public Offering?

Direct Public Offerings (DPOs) are shares of stock in a company, usually a start-up, offered to potential investors so as to raise funds for the company. However, unlike the conventional way of selling stocks to a broker who then sells the stock to any potential buyer, with direct public offerings the company cuts out the middleman and directly sells the shares to potential investors.

DPOs are registered security offerings with the state security administrators. However, there is no underwriter for selling the stock. The company will sell shares of stock directly, usually to groups that the company has a financial relationship with, such as customers, employees, suppliers, distributors or anyone else the company would have as its trusting and loyal supporters.

What Are the Advantages of Direct Public Offerings?

There are several advantages to a DPO that can make it more appealing to a company rather than the conventional manner of selling shares of stock, raising money through venture capitalists, or taking out loans:

What Are Some Disadvantages of Direct Public Offerings?

While DPOs can be helpful for start-up businesses, before you fully decide on this method instead of other more conventional methods you should be aware of the risks you will be taking:

Where Can I Get Some Help for Setting Up DPOs for my Business?

First off, you will want to find an accountant who can help you with the process. In addition, you will most likely need an attorney who has experience in securities law. Your attorney can help you understand the securities laws that apply to you, as well as assist you in getting documents through the state security administrator's office and the SEC.

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Last Modified: 06-30-2015 10:32 AM PDT

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