Howard E. Berkenblit is a partner in the Corporate Department of Sullivan & Worcester LLP’s Boston office and a co-leader of the firm’s Securities and Corporate Finance practice group. He specializes in counseling both public and private companies involved in equity and debt financings and ongoing corporate governance and disclosure matters.
In episode 7 of the Fresh Ground Podcast, Chuck Tanowitz talks with Howard about how the “quiet period” — most typically associated with investor relations around public IPOs — also applies to private funding rounds as well. Private companies engaging in angel, venture capital and private equity funding most commonly take advantage of Regulation D, Rule 506 to avoid registering a public offering (and thus keeping the offering private). This regulation places a number of restrictions on marketing the company that many communicators are unaware of.
The key takeaway: your company’s PR track record is not just important going into an IPO, it’s important at all stages of private equity offerings.
Some of the more interesting excerpts:
“[The] more you can establish a track record early-on of ordinary course communications that don’t have anything to do with corporate developments or certainly offerings or intentions to raise money, the better you’ll be…”
“If you use social media as a regular channel for your communications for ordinary course business announcements … that will [help establish] that you’re not engaging in general solicitation….”
“The key is [not to] have any mention or even implication of fundraising….”
“[The] cases that make the headlines are not going to be the close calls, but that … doesn’t mean that companies shouldn’t clearly think about what they’re doing….”
“If you know the people you’re talking to already … you don’t have to worry, it’s general solicitation — you’ve already got the relationship. The concern is when you bring in people who you’ve never met before to invest in the company, and how did they find out about the offering…”
“There are some other strategies that have worked that the SEC has indirectly blessed here, or not complained about. For example, if the company has a relationship with a registered broker/dealer or placement agent, and they have people they’ve pre-qualified before the offering to invest in this type of offering [then] that middleman can set up meetings between the company and clubs of angel investors and things like that.”
“[You] can’t just [go] to wherever you’re invited to speak at and start talking about how people should invest in your company…”
About the Fresh Ground Podcast: Each week, we feature 10 minutes of insights from people driving change in today’s competitive business and media landscape. We talk about the evolving worlds of media, public relations, marketing and business, with a special focus on creating more social organizations.
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