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How to Really Benefit from Associations (Part 2 of 3-Part Series)
This is Part II in a 3-part series. For your convenience, the entire series is online here: · Part I: “How to Develop Industry Contacts” http://movingaheadcommunications.com/associations1.html · Part II: “Tips For Improved Networking in...
Publicity: Utilizing a Press Release Effectively
Publicity is valuable to the livelihood of a business. Yet, some business owners hesitate to market their company through a press release. Instead, they rely on 'word-of-mouth'. But if your market is in the virtual marketplace, word-of-mouth...
Satisfying your Customers is as Simple as this...
Customer service is everywhere. It seems everyone we deal with now is a 'customer service representative'. Remember when they were bank tellers, flight attendants or just the person behind the enquiries desk? So why is the experience of fantastic,...
The Top 10 Creative Excursions for Building Effective Teams
The art of leadership is best learned by doing and by observing real-life situations. These ten creative excursions will provide you and your team with practical insights essential for success both today and the future. 1. A Day Trip to The...
When Managers Play the PR Card
The payoff for business, non-profit or association managers can be a real assist towards meeting their department, division or subsidiary objectives.
Playing that public relations card means they’ve decided to pursue their objectives by...
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Selecting An Equity Finance Consultant
Selecting An Equity Finance Consultant By William Cate
Most Chief Financial Officers (CFOs) realize that it's a hundred times easier to raise venture capital for a public company than a private company. There is no shortage of individuals and firms seeking to advise and coordinate the going public process for CFOs. The problem is that many of these equity finance consultants are inept and/or dishonest. Here are some simple rules for finding a competent and ethical advisor.
Avoid firms that don't disclose anything about themselves or their employees. The Net is a wonderful free-tool for doing "Due Diligence" investigations on firms and individuals. Do an advanced search on the firm and its principals. Credit checks and background investigations are wise investments before you hire any consultant.
All equity finance consultants have two basic ways to take your company public. They can help you do an Initial Public Offering. Or they can suggest one of several alternative ways to go public in the USA. None of the alternative tactics include a public financing for your company. Whatever solution the prospective equity consultant advises, you should ask for an estimate of costs, time to trading and the odds of being called for trading. You should also determine how the equity finance consultant expects to make money helping your company go public.
If you have an operating company and decide to do an IPO, your costs should average between $1.5 and $2.25 million. You should expect that it should take an average of 18 months to get your "Effective Letter" from the SEC. And your odds of success are about even, that is, 50/50. You should expect to pay your underwriter about 18% of the money raised. You will be expected to pay non-refundable upfront expense fees. You should budget $10,000/per broker presentation that will be needed to help the underwriter raise your IPO money. If your prospective consultant disagrees with these guidelines, ask them in writing for the evidence to support their viewpoint.
IPO alternatives range in costs from $60,000 to several million dollars. Amazingly, the most expensive IPO alternative is the most popular. While doing a reverse merger shouldn't cost your company more than $150,000 in out-of-pocket Due Diligence costs, the expense of maintaining your shell float's share price will run into millions of dollars.
In a reverse merger, the public shell insiders retain their shares. This means they have several million shares of your stock to sell. You are responsible for finding the public buyers of their stock and all future shareholders of your public company. Let's assume that the reverse merger insiders have three million of your public
company's shares. Your goal is to maintain a $4 share price. The previous shell owners will gross $12 million on the sale of their reverse merger shares. It should cost you $0.25/share to buy the past owners' shares. The past owners will take a three million-dollar bite out of your investor relations' budget.
However, that's only the beginning of your problems. Your reverse merger public company must now find the buyers, each quarter, for those past insider shares. Assuming you can maintain the same $4 share price, the estimated annual investor relations costs will be $12 million per year, in addition to any other shares in the public float. This $12+ million investor relations cost will continue as long as the company is public and trading at $4/share.
The cash price of an OTCBB (Over-the-Counter Bulletin Board) shell with 90% or more control is about $1.5 million. The primary advantage to a shell purchase is that the buyers are certain that their shares will trade. The major disadvantage is that the shell insiders often create shares for themselves and hide this fact from potential buyers. The industry axiom is that there is no such thing as a clean shell. Thus the buyer also inherits the future costs of finding the buyers for those hidden shares.
There are alternatives to taking a company public whic cost less than $100,000. They don't create stock that enters the float. If you are interviewing potential equity finance consultants, you should ask them for their low cost strategy and determine its odds of working for your company. You should also ascertain the ongoing investor relations costs of any public company strategy.
Most professionals in the equity finance business have far more interest in short-term profits than long term earnings. If your purpose in going public is to give your investors a "liquidity event," you'll easily find equity finance consultants who share your myopic vision. If you are going public to build your company, you should read my ebook Venture Capital Profits. It's the formula for a win/win public company strategy. The public profits. The insiders and private placement investors maximize their profits.
About the Author: Since 1981, William Cate has been managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/], a Merchant Banking and Equity Finance Consulting firm. He can be contacted at: Beowulfinvetments@Earthlink.net
About the Author
He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
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PR.com: Directory of Businesses Jobs Press Releases Products ... |
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PR Newswire - news distribution, targeting and monitoring |
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PR Week Magazine |
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Public relations - Wikipedia, the free encyclopedia |
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Puerto Rico - Wikipedia, the free encyclopedia |
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The Public Relations Society of America (PRSA) |
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CIA - The World Factbook -- Puerto Rico |
Profile of Puerto Rico by the Central Intelligence Agency (CIA). |
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Edelman |
Full service global public relations firm. Includes company profile, management team, practice areas, industries served, case histories, client listings, ... |
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LEWIS PR - global public relations |
LEWIS PR is a global public relations consultancy working with leading and emerging brands and delivering predictable results tied tightly to client goals. |
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Online Public Relations Home Page |
Free online resource for public relations professionals. |
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Chartered Institute of Public Relations, CIPR, the professional ... |
The CIPR is the professional body for the UK public relations industry, providing PR training and events, PR news and research, and a PR jobs board. |
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PR News Online — Trusted Source for Public Relations News, PR ... |
The latest news on public relations delivered FREE right to your inbox. ... Psycho-Geometrics Help You Know What 'Shape' Your PR Team's Personality Is In ... |
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O'Dwyer's Public Relations News - odwyerpr.com |
Features breaking news about the public relations industry, a database of PR firms, listing of PR service firms, client search tool and job postings. |
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PR News Online — Trusted Source for Public Relations News, PR ... |
E-letter. The latest news on public relations delivered FREE right to your inbox. ... Share ideas with your peers in PR News' just-launched Forum ... |
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Linux PR: |
Comprehensive Press Release and Public Relations resource for the Linux community. |
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Escape to Puerto Rico - Your Internet Guide to Puerto Rico |
Internet guide to everything Puerto Rico. Offers lots of photos, accommodations and travel information from around the Island. |
escape.topuertorico.com |
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