S1 Use of Proceeds

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IPO Process Library · 03 S-1 & SEC Disclosure

Last Updated | November 11, 2026

Use of Proceeds

The use of proceeds section tells investors how the company plans to spend the money it raises. Companies must disclose principal intended uses of net proceeds and approximate amounts. Money from selling stockholders' shares goes to those holders, not to the company.

Key Takeaways

• Net proceeds are after fees and expenses.
• Secondary share sales do not fund the company.
• Specific uses are more informative than generic ones.
• Later filings show whether proceeds were spent as described.

Typical UsesPrimary vs SecondaryWhat to Look ForFrom Gross to NetFAQRelated

01

Typical Uses

Common uses include general corporate purposes, working capital, product development, sales and marketing, debt repayment, acquisitions, and paying taxes related to equity awards. Vague language such as "general corporate purposes" is common but gives less insight.

02

Primary vs Secondary

Net proceeds are the offering amount minus underwriting discounts and offering expenses. Shares sold by existing holders produce no proceeds for the company, so the split between new and existing shares changes how much the company can invest.

03

What to Look For

Debt repayment to insiders, large payments to selling holders, or acquisitions identified before the IPO deserve a closer look. Compare the stated plan with later disclosures in 10-Q and 10-K filings.

04

From Gross to Net

Line	Meaning
Gross proceeds	Shares sold times offer price
Underwriting discount	Spread paid to the banks
Offering expenses	Legal, accounting, printing, and filing fees
Net proceeds	Amount available to the company

05

Common Questions

Must a company list exact amounts?

It must disclose principal purposes and approximate amounts, or say if it has no specific plan.

Where can I see how the money was used?

In later 10-Q and 10-K filings.

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Methodology & Sources
Synthesizes SEC rules and guidance (Securities Act of 1933, Exchange Act of 1934, Regulation S-K), NYSE/Nasdaq listing standards, FINRA rules, and public S-1 filings. Cross-checked against primary documents. Rules, thresholds, and timelines change; confirm current requirements with counsel before acting. General education, not legal or investment advice.

Author: Erwin Castro