Financing Alternatives Available to the Company
Chapters in this video
- 0:00 Three-step quest: entity, investors, transaction
- 0:37 Double tax vs pass-through: C corp, S corp, LLC, MLP, REIT
- 1:15 Why S corps block public IPOs
- 1:37 QIB $100M rule and the $10M broker-dealer trap
- 2:21 Qualified purchasers vs QIBs: separate thresholds, separate doors
- 2:48 Mutual funds vs hedge funds: public transit vs private club
- 3:13 Primary vs secondary: follow the proceeds
- 3:59 PIPE: private money into public issuers
- 4:52 Rapid-fire exam recap
What this video covers
- Why a C corporation faces double taxation while an S corporation, limited liability company (LLC), master limited partnership (MLP), and real estate investment trust (REIT) are all pass-through entities
- Why an S corporation cannot execute a public initial public offering (IPO) because it is closely held by definition
- The qualified institutional buyer (QIB) threshold of $100 million in securities and the broker-dealer exception down to $10 million when acting for its own account
- How qualified purchasers differ from QIBs, with thresholds of $5 million for individuals and $25 million for institutions, and which private-fund door each unlocks
- Why mutual funds are registered open-end vehicles with daily net asset value (NAV) and broad public access, while hedge funds are lightly regulated private-placement-only vehicles
- How to distinguish primary offerings (new shares, dilutive, proceeds to the company) from secondary offerings (existing shares, non-dilutive, proceeds to the selling holder)
- What a private investment in public equity (PIPE) is: a private placement into a public issuer, usually at a discount, bypassing registration
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