3c hapter - Index of

The Do- It- Yourself Public Offering 195
option are typically smaller, an exchange such as the NYSE or
NASDAQ is usually out of reach. 6 In lieu of the big exchanges,
companies can list their shares on the lightly regulated over- thecounter
(OTC) market, but that is the realm of penny stocks and
boiler room intrigue, and many companies and investors prefer to
steer clear of it. A third option is to operate an alternative trading
system, like the one Andy Klein set up for his beer company. Real
Goods similarly received a green light from the SEC to run a small
trading site for its shares after its 1991 DPO. But SEC approval for
such alternative mechanisms is harder to come by these days. And
even with approval, not all companies are willing or able to create
and maintain a web site capable of matching buyers and sellers.
Regional exchanges used to list their local companies. The
Pacifi c Stock Exchange, for example, until recently carved out
a space for regional companies that had conducted SCOR or Reg
A offerings to be traded. Shares of Real Goods were listed on the
exchange in addition to the company’s own bulletin board. But
that practice ended after the Pacifi c Exchange was merged with
the NYSE in 2006.
Without a trading mechanism where investors can cash out
their shares, DPOs are only half a solution. That’s where the local
stock exchange comes in.
Game Plan for Locavestors
Direct public offerings are a low- cost way for companies to sell shares
directly to the public. In return for capital, investors get in on early stage
investments usually reserved for angels and accredited investors. The
offerings can include equity, debt, or other forms of fi nancing.
Pros:
•
DPOs give investors an opportunity to get in on the ground fl oor
of exciting investment opportunities and participate in high risk/
reward venture- stage funding typically limited to wealthy or institutional
investors.