Page 75 - Initial Public Offering - An Introduction to IPO on Wall Street

Risk Associated with the Business—Risk factors are those unique to the business and not to
any other business or offering. It is important to report risk factors that make an offering
unpredictable or risky. The following are some of these potential risk factors:

 Recent negative events or losses from operations;
 The need for more financing;
 Public investor dilution;
 Trends in the industry or seasonal patterns of business;
 Substantial competition;
 Dependency of the company on a few clients, vendors or key management personnel;
 Details concerning substantial contracts or licenses;
 Effects of the present or planned law (e.g. health care, communications); and
 Shifts in technology

Use of Proceeds—the intended use of the earnings from the offering must be announced by a
corporation. This portion of the registration statement should be properly drawn up because,
after completion of the deal, the SEC wants information on the actual distribution of the
earnings. Due to change in plans of the organization, the practical use of the earnings may
change between the date of filing and the start date. When this happens, this portion of the
statement of registration will require an updated at the start date. Common uses may include
acquisitions, deficit reduction, capital investments, spending on R&D, and advertising
expenditure.

Dividend Policy and Restrictions—A business must report its existing dividend policy, any
expected adjustments to that policy and any limits on the ability of the organization to pay
dividends. For instance, not paying dividends is not unusual for many new public organizations,
but rather keeping earnings for funding operations and growth plans of the company.

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