Basically there are 4 ways to go public. These all seek a single goal, “free trading shares”. Shares issued, by any company, even a mom and pop, are deemed restricted. Restricted means that the shares can only be sold under certain circumstances. Free trading means that the shares are just that, freely tradable. Put another way, the holder of the shares is able to solicit their sale through “general solicitation”, meaning to the public at large. There are basically 2 ways for a shares to become free trading. 1) Register the shares. There are several forms for registering shares, S-1, S-3, and S-8 are the most common. However, for going public, S-1 the only relevant one. 2) an exemption or safe harbor from registration. The 2 most common examples are Rule 144, which requires, among other things, the shares to be held for a minimum of 6 months, and shares issued pursuant to a bankruptcy. Once free trading shares are created, you can then apply for a symbol. This process is generally called a 15c211 application, which is submitted to FINRA, tho pseudo-governmental body that governs markets and the financial industry. Although not written in stone, it is the standard that a company have at least 35 shareholders to make a valid market. These shares cannot be heavily concentrated. For example, you couldn’t have 134 shares where one person owns 100 shares and 34 people own one share each. The reason is that the shares must be held in a manner that will create a viable market. Once you have a symbol, you are off to the races, with all kinds of exceptions.Below are the four ways to “go public.” There are many rules and regulations involved here, so I will just hit the bullet points.Traditional IPO. This method utilizes Form S-1. This can go several ways, but the first breakdown is underwritten or self-underwritten. Unwritten means an investor agrees to buy shares that are not purchased in the offering. Self-underwritten means basically there is no support. Sometimes called a “best-efforts” offering. Either way, a company “offers” their securities to the public once the Form S-1 is approved. Investors can then subscribe to the offering, purchasing shares per the terms of the offering, e.g. 1 share for $5.00. A variation on an IPO is to register existing shares. This could occur because an investor has “registration rights” or the shareholders determine it is time go public. Here no shares are being offered by the company, but the shares being registered may be sold publicly. A Form S-1 can accommodate hybrids of these and can also register other instruments in the hands of investors. For example, an equity line of credit can be registered, however, you cannot “go public” through equity line. Form S-1 requires 2 years of audited financials, audited by a third party PCAOB auditing firm, plus any stub periods.Reg A. This is an old regulation that has been updated and is the new big boy in town, particularly in crowdfunding circles. Technically, Reg A is an exemption and NOT a registration. The process is similar to a Form S-1. The result of a “qualification” is that the shares purchased from the offering are free trading. Reg A has 2 tiers, each with there own set of rules and limitation. For our purposes, we look at Tier 2. Here your offering is limited to $50m in a 12 month period. Like an S-1, you need 2 years of audited financials, but the auditor need not be PCAOB certified.Reverse merger. Although mostly popular is the infamous pump and dump, micro cap world, a reverse merger is a very viable concept. Berkshire Hathaway went public in the 80s via a reverse merger. The basic concept is that the private company mergers into an existing public entity. As a result, the private company’s management and shareholders become the management and shareholders of the public entity. The shareholders of the public company either are diluted by the merger itself or they sell to the shareholders of the private company or some other variation. Reverse mergers are popular because they are the fastest way to go public. Because of this, there is an ever existing market for buying what are called “shells”. Shells can sell for as much as $500k for a microcap to as much as $5m for a NASDAQ or similarly listed company. In these transactions, the controlling interest of the public company is purchased directly from the holder prior to completing the merger. This is the preferred method of the sellers, because they don’t want to be invested in the private company that they don‡ t know anything about. Because it is the fastest way to go public, it is also the most ripe for fraud and other securities regulation issues. Also, companies that have been public for sometime may also have some big skeletons, e.g. unsavory shareholders, toxic debt, regulatory nicks. What seems like a short cut can quickly become a very long and arduous ordeal. That being said, reverse mergers are still a very viable option. (A little sidenote. There are companies going public under Rule 419 which is structure explicitly for companies seeking private acquisition targets. However, the rules are burdensome and very few are used unless they qualify as a true “Special Purpose Acquisition Company” or SPAC.)The last option is the most clever and rarely used. As I said in the beginning, shares become free trading either by registration or an exemption from registration. Form S-1 is registration. Form 1-A (Reg A) is an exemption. The reverse merger takes advantage of the fact that the target is already a public company. The fourth option relies solely on rule based constructs for exemptions and safe harbor. Though there are many exemptions, the most known is Rule 144. Rule 144 is designed to prevent companies from just dumping their stock into the market. It has many prongs and test, but it boils down to holding the shares for a sufficient amount of time to ensure that the company is being devious in its share issuances. So, you have a private company, it has always been in operation with assets sufficient for those operations (a requirement). You have at least 35 shareholders AND those shareholders have held their shares for at least 12 months, you may go directly to FINRA and apply for a symbol. This is kind of under the radar version of going public. Little fan fare. No public documents until the symbol is issued.Now a little note on being “public”. Being public basically means that your shares are trade on a national exchange. The ones most people know are NASDAQ, the DOW, or the NYSE. There are other exchanges, however. Traditionally called bulletin board or over the counter exchanges it is the land of mid and micro cap companies. Currently, there are three major exchanges in the lower tiers, all run by OTC Markets. OTCPink, OTCQB, and OTCQX. These markets are usually referred to as “penny stock exchanges” because the price per share often qualify as a “penny stock” as defined by the SEC (anything under $5 is a solid one line definition). Though some really solid companies, Nintendo for example, have their stocks traded in these exchanges, there are also many very poor companies. These markets are incredibly volatile and unpredictable. Ever seen Wolf of Wall Street? This is where he made his money. This is where terms like boiler rooms, pump and dump, and market manipulation tend to roost. Don’t get me wrong. There is plenty of fraud and market manipulation on the higher exchanges, and probably more dangerous given the size of the trades, but the markets are more stable. The prices are more directly in line with the fundamentals of the company’s financials. All that said, it is also cheaper to be on the lower tier exchanges. And simply being there is not a bad thing. Like I said, there are some really good companies trading on these exchanges.That’s about as brief as I can be. I hope that helps. And I apologize for any typos or misspellings.;"";""