Confidentially Marketed Public Offering

By Dennis McCarthy – (213) 222-8260 –

Welcome to the Equity Series – Raising Equity for Small Cap Public Companies

This particular video addresses one way for a company to use a shelf registration to raise equity through what’s known as a confidentially marketed public offering or CMPO.

In a CMPO, a company carefully approaches potential investors and gets them to agree to refrain from trading or disclosing their knowledge of the planned offering.  This is called “bringing them over the wall”.

The goal is to quickly arrange sufficient investor interest in an offering without letting Wall Street in general, know that an offering is underway in order to prevent Wall Street from shorting the company’s shares and depressing the stock price.

The longer the time the offering takes and the more investors approached, the greater the risk that word leaks out and gives Wall Street the opportunity to short the stock.

At some point, the offering company files a supplement with the SEC detailing the terms of the offering, (how much was raised of what security and which broker-dealers were involved). The offering is then visible to the public but the deal is done so there’s no opportunity for Wall Street to short into the offering.

A CMPO presents a more limited marketing opportunity for a company’s offering than a traditional registered offering but is designed to reduce the risk that Wall Street shorts depress the company’s stock price.

An increasingly common variation on this mechanism is an offering initially conducted as a CMPO, then, with the bulk of the offering amount raised, the offering is shifted into a visible traditional public offering to quickly permit the addition of investors who might not have been contacted confidentially.

This shift to a visible public offering usually lasts for only a day or less so there’s not much time for a broad marketing effort or roadshow.

Hybrid mechanisms such as this variation on a CMPO are an attempt to obtain some broader marketing benefit without suffering the risk of Wall Street shorting and depressing the stock price. 

There’s another, more technical benefit to adding this shift to a visible public offering but I’ll leave that to my legal colleagues to cover.

I have videos in this series describing mechanisms designed to meet other corporate objectives.

Please contact me to help your company to raise equity or to complete other capital market projects.