New York City-headquartered Aegis Capital Corp. offers clients a comprehensive range of institutional and retail financial management solutions. Having enabled capital market transactions totaling more than $55 billion, Aegis Capital Corp.’s transactional experience extends to initial public offerings (IPOs) and alternative public offerings (APOs).
APOs combine a private investment of public equity (PIPE) with reverse mergers. This allows companies to avoid the often cumbersome and time-consuming IPO process.
With the APO, a shell company with no real assets or liabilities beyond PIPE financing is set up. Restricted, unregistered stock is sold to accredited private investors, with the underwriting investment bank typically arranging financing through institutional partners. Once capital is raised and due diligence conducted, 8K documentation is filed with the SEC, along with a registration statement, at which point the PIPE is released from escrow and the stock can be traded.
Properly funded, APOs offer a number of advantages over IPOs, including cost savings and fewer required public disclosures prior to closing of the deal. This enables private companies to assess viability accurately among investors before an announcement is made. PIPE investors also receive a host of benefits, including the ability to sell the stock at a significant discount to valuation on the public market. The successful APO thus serves to spark general investor interest in the newly liquid company stock and fuels subsequent growth.