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I wish I could say that I wasn’t writing this article from experience but that would be a lie. I wish I could say that chemistry is never an issue between the consultant, S1 attorney and newly elected board members but that would be nave.
The truth is some attorneys who perform great on some public offerings are an absolute nightmare on other transactions. Some board members with a gargantuan size portfolio of contacts are worth the aggravation on some deals but on others fall flat on their face as they try to take the whole company to the ground with them. The reality is qualifying an attorney for the process of an S1 filing goes far beyond whether they’ve got time and experience under their belt. You need to ask the more difficult questions that are almost impossible to test for such as, how do they react in stressful situations? Are they open to stepping outside of their comfort zone to engage in cutting edge filing strategies to speed up the offering process? Do they help with the fundraising? Are they able to refer a PCAOB auditor and a market maker to file the 15c211? These are things that need to be addressed with your S1 attorney but are difficult to actually test beforehand.
Each lawyer is different and all I can say is sit down with them and drill them with a million different questions from a multitude of angles to test their knowledge and their patience. Watch their facial expressions, hand gestures, eye and forehead shift. Look for a bouncing leg or foot and other nervous habits and what questions did you ask to trigger this nervous twitch?
The same techniques can be used for qualifying a board member. The only way to get the best idea of whether there is a fit is to push them to the brink during the interview?
Be careful with this as many qualified professionals could easily take this challenge as disrespect and they’ll walk so don’t be rude or arrogant but with a placid look on your face and a calm voice, drill them and drill them hard.
Many consultants in this industry, myself included had to learn this lesson the hard way and took a lot of time and effort to correct the mistake of bringing on the wrong individual for the solution we were seeking. This is an extremely high stress industry and the environment is constantly at 100 degrees.
Concentrate on being calm, forward thinking, compromising on some issues and uncompromising on others, write down 10 pages of questions and when you sit down with the candidate ask all those questions and other questions that come to mind during the meeting. Test them, push them and get the right person for the job.
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I deal with S1 attorneys all day every day and most of them are entrepreneurial, hard working and interested in helping you in any way they can but there are also a lot of bad ones out there. If you are taking your company public the last thing you want is a broke as a joke s1 filing agent.
I recently had the misfortune of working with (for a very short time I might add) a New Jersey lawyer who had us all convinced by her pepper gray hair and fluency of legal jargon as a second language and quick calls to what she had us convinced where big shot investors who had millions to put into this and other transactions we brought her way.
During initial negotiations she and I sat down in a coffee shop and went over her equity position and fees in the transactions that she’d be working on for us and it was pretty simple and straight forward. I would have my team organize and structure the company and transaction and she would simply file the s1 in exchange for 2% to 3% equity. Pretty nice payday for minimal work and gaining equity in an average company producing $5m+ per year.
Ah yes, but when it sounds too good to be true it is and when it seems too easy of a negotiation…it is! When she sent us the contract she felt the need to add a few percentage points to the tune of 7%, making a total of 10% equity and she also was charging an extra $10k to fill in the blanks on your prototypical PPM doc. Why did she jack up the price? Her response was, “This S1 will have comments”. I almost died laughing. Of course it’s going to have comments with the SEC, that’s why it’s called the ‘comments’ stage.
We talked her into taking 2 payments for the $10k, half upfront and half on completion but we really should have dumped her right there. She didn’t want to keep her word on that either so I paid her the last payment before the fee was due and just got rid of her.
Turns out she never filed an s1 before and her whole act was a sham. She was desperate for cash and nickled and dimed us the whole time. I laugh about it now but it wasn’t funny when it happened. We lost over a month of transaction time because she couldn’t tell the truth.
The client was going public on the OTCBB with a valuation of around $5m, her suggestion was to raise capital pre public for $1 per share because the company would have a hard time qualifying for the NASDAQ if it started at anything less than $1. This company was years away from even considering the NASDAQ as an option but her in experience and need to prolong the deal to rape us for fees was so blatant and careless that she did everything she could to add as much confusion to the deal as possible so that no one knew what was going on, therefore she got away with a lot and was able to pick our pockets for weeks before we got rid of her.
The moral of the story is this: not all attorneys are rich. The truth is, most are very modest as far as their earnings. There is too much competition these days so there are predatory lawyers out there that will lie, double talk, triple talk and run you around in circles. All the while the clock is ticking and they are billing you like it’s going out of style. Watch your back with the dead broke S1 lawyer.
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Wouldn’t it be great if you could take a lawyer based on their word? Right now you’re thinking, “is this guy crazy?” because the mere concept of trust has become a laughable concept. Some attorneys will tell you what you want to hear and when you get the contract which puts in writing everything that you discussed it’s like the attorney wrote it in pig Latin, hand jive images and Hindi. Nothing is what it was on the phone call and everything gets lost in legalizes technical jargon.
Now lets get a little closer to home. Your company is growing and you need to raise capital. The banks want suck the life out of you and the venture capitalists love the opportunity but will need a pound of flesh, a pint of blood and your first born in order to part with their capital.
Where do you turn if you just want a square deal to use the strength of your company and your track record of success to raise capital? The answer is simple, go public. Pick a solid volume exchange like the OTCBB (Over The Counter Bulletin Board) and get things moving. Use a consultant to guide you through the flesh cutters and blood suckers who will suck your company dry of equity and capital and when you are picking an Investor Relations firm get their latest symbols and a few references and start your research there but when it comes to the S1 Attorney, those gosh darn S1 attorneys, approach with extreme caution.
Get a solid grasp of their background. Do you have professional chemistry with them? Interview several securities attorneys before making a decision; get trading symbols and edger links. How many rounds of comments do they average with the SEC? Will they support or block your consultant from doing his/her job? Are they confrontational? Take all these things into consideration and then when you’ve decided on an attorney the last thing you need to make sure they do is make sure that they can get you set up with a market maker for your 15c211 filing. If the lawyer says that this isn’t their job, you tell them, ‘Think again Paunchy’.
A good filing attorney will always get lobbied by market makers and they should have contacts in spades. We all have our nightmare stories about dealing with S1 lawyers who screw up deals, prolong deals, change deals, swindle clients and will put a company through the ringer for a year and in the end can’t even get through SEC comments. Do your research, get referrals and get informed.
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categories: s1 attorney,s1 filing,s1 lawyer,s1 attorneys,s1 lawyers,s1 consultant,s1 consultants,file an s1,james scott
For companies wanting to go public the basic understanding is to find an S1 attorney that will look out for your best interest and make the process easy. But what you’re not thinking about is the sub-sector of predatory attorneys that just look at you as easy prey. They’ll jump into your company, distract you by confusing you with technical jargon, fast talking and stressful scenarios that could never happen and when you’re not looking they’ll carve out a nice fat piece of equity on top of their excessive fees that pile up as they rob you blind with their insularely fees.
Qualify your S1 lawyer the way you would a blind, deaf, mute, quadriplegic proctologist before you go in for surgery. The fact that they can do what you’ve read in their promotional material is possible but most likely won’t happen, not that it can’t happen it’s just they can’t make it happen. Got it?
Be wary of S1 attorneys that will try to confuse you and distract you from your original goal. Let’s say it was your goal to go public on the OTCBB, the attorney who wants to take you for a ride will distract you with statements geared towards far fetched issues to scare you into submitting to their, not so far off, actions of adding fees, slicing off equity and other things of this nature. A perfect example is an attorney who gets involved with the client’s PPM share price with oppressive authority. If you’re company has a valuation of $3m they are trying to tell you to sell shares pre public for $1.00 or so which is absolutely, completely unrealistic, especially when you look at existing in the post public arena. They will tell you that at .20 cents per share pre public your pre revenue company will never have a chance to get on the NASDAQ (NASDAQ should be the furthest thing from your mind at this stage as you should be focusing on your pre public share price and post public IR). If the predator S1 lawyer sees you’re organized and have a solid comprehension of the process they will take away your confidence in those around you to gain more dependence by you. They will tell you that you can’t pay your IR firm the way you’ve already pre negotiated or that they are dirty or whatever.
When it comes to the PCAOB audit they will absolutely insist on you using their guy even though he charges twice the amount of other firms that gave you a quote and you can rest assured that the markup is their commission for scaring you into using this firm.
At the end of the day the predatory S1 attorney will confuse you, up-sell, over charge, scare, belittle and whatever else they have to do to make sure that at the end of the day they can get away with charging and taking everything without having to deliver anything and it will be structured so that the blame falls on you for not fulfilling the obligations set on you by the attorney. Good luck out there!
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The undertaking of a public offering on the OTCBB, just as with the NYSE and NASDAQ can be tedious, strenuous, exhausting and an ongoing perpetuation of one failure after another until you just throw in the towel and call it quits; but it doesn’t have to be that way.
Going public can be rewarding, prosperous, empowering and the beginning of massive capitalization and international expansion. There are two things to remember when putting your ‘going public’ plans together. First: don’t be nave by thinking that you can do it yourself, you’ll certainly fail as this process has too many components and is infested with sewer rats that will climb on your back for a free ride just in case you make it. Second: be smart and hire an IPO Strategies Consultant. This type of business consultant is rare and difficult to find as they are in demand globally because of the streamlined manner in which they are able to take a company public.
Strategies consultants that specialize in pre public corporate strategies and structuring, IPO facilitation and post public investor relations planning and mergers and acquisitions. They’ll expedite the public offering while giving your company a powerful foundation conducive to hardcore domestic and global expansion.
The road to becoming a publicly traded company is littered with the carcasses of companies that either tried to complete the process on their own or corporation with the foresight to hire a consultant but battled the consultant on each portion of the process and added so much stress to the deal that the consultant threw in the towel and moved onto the next project.
Word to the wise, this is one industry that you, the inquisitive self taught or over educated doesn’t stand a chance. The intricacies of this industry are of such proportions that unless you are completely submerged in this business for years with 80 hour work weeks you won’t even crack the surface of what it takes to go public and stay public and grow through expansion with a solid trading volume to monetize your company’s securities to create expansion capital.
Find a consultant, step back, keep your cell phone hand and leave this to the professionals while you reap the rewards. You’ve earned it! Through your blood, sweat and tears you’ve built your company. You’ve created jobs, contributed to the economy, paid Uncle Sam his pound of flesh, you deserve to succeed. Use the process of going public to create wealth for your family, long term job stability for loyal and hard working employees and a product or service distribution that spans the globe.
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