|
|
7 Steps to Developing Leaders
Try to tap into untapped energy that may be lying dormant for lack of interest or challenge to motivate people - this is a key to finding and developing new leaders. Remember that rising through the ranks does not guarantee qualities needed for a...
Are You the Culprit?
Are you a manager who pretty much ignores your organization’s important outside audiences?
If that’s you, do you realize how difficult you’re making it to achieve the important behavior changes you really need and want? I mean changes that...
Five Essential Hiring Practices
Recruiting and hiring are often done in haste, leaving the company to repent in the long run. Today, there’s a reason to be concerned about negligent hiring. Negligent hiring means you and your company can be sued if one of your hires injures...
Public Relations Going O.K.?
Yes? Good! Still, if you’re not getting the behavior changes you paid for, you’re wasting your money. Here’s why I say that. People act on their perception of the facts, and those perceptions lead to certain behaviors. But something can be...
Where to Find a Cash Windfall of $10,000 - $1,000,000 - You Never Knew You Had
Where to Find a Cash Windfall of $10,000 to $1,000,000 - You Never Knew You Had.
By Jay L. Abraham as told to Marc Goldman
There is a rather famous true story called “Acres of Diamonds”.
It is about a successful farmer who risks...
|
|
|
|
|
|
|
|
The Shell Trap
The Shell Trap By William Cate
[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
Publicly traded shells overcome two of the three primary obstacles to becoming a U.S. public company. The private company avoids the U.S. Securities Exchange Commission (SEC) initial registration review process. By buying a shell, the private company reduces the time it takes to go public from over one year to several weeks. The odds of a registration effort getting a SEC "Effective Letter" are better than even. Because the shell is publicly trading, the odds that the shell will continue to trade are almost certain. Shells win on time and certainty issues.
THE PROBLEMS
However, buying a trading shell means dealing with a different set of problems. The Industry Axiom that there is no such thing as a clean shell is true.
1. Shells aren't clean because the shell sellers usually hide shares or access to shares that will be sold after the buyer takes possession of the public company. The shell buyer tries to strengthen the public company's share price. The past insiders sell undisclosed shares into this effort. 2. If the shell has an operating history, there is always the risk of litigation by the SEC or by third parties. 3. Actions taken to clean up the shell, such as reverse splits of the stock are certain to antagonize existing public shareholders and their brokers, who are often the company's market makers.
While professionals can help a shell buyer reduce these and related risks, they can't be eliminated.
REVERSE MERGERS
In an effort to overcome the third primary obstacle to doing a SEC registration, most shells are sold as reverse mergers. The shell insiders and public retain their shares. The publicly traded Shell Company issues stock for the private company that gives the shell buyer over fifty percent control of the trading shell. The shell insiders expect to make their money by selling their shares.
Without a doubt, a reverse merger is the most costly way of going public in the United States. It ensures that no knowledgeable investor will do a private placement financing of the resulting public company. He knows that the shell buyers will dump their stock into any rising price, thus depressing the share price. He also knows that the added investor relations’ costs of supporting all those extra shares will kill off the company quickly. And failure to spend those funds will do the killing just as effectively.
FALSE PERCEIVED SAVINGS.
In April 2005, you can buy a public shell with 90% control that trades on the Over-the-Counter Bulletin Board (OTCBB) for about US$1.7 million. The costs of doing a reverse merger are about $200,000. The buyer appears to save US$1,500,000. However,
the insiders have their shares and will sell them. The buyer must pay the investor relations costs to find the investors for these insider shares.
Let's assume that the shell insiders have 3 million shares and the buyer pays to take down these shares at an average price of US$4/share. The investor relations costs to create the buying will be about US$750,000. At this point, the reverse merger is still a good deal for the buyer because they have spent a total of about US$950,000 against a registration cost of at least $1.7 million. They have saved US$750,000.
MANAGING THE FLOAT
The stock held by the public is called "the float." As a general rule, the float trades every quarter. If the public can't sell their shares in any quarter, the share price drops. If buying exceeds the float, in any quarter, the share price moves up. The three million shares of shell insider shares are now part of the float. To hold the US$4/share price, the buyers must spend US$750,000 per quarter in investor relations' costs. In one year, their publicly traded shell will cost them US$3 million to buy the shell insiders' shares and repeatedly find share buyers each quarter for the resulting float. Almost always, the investor relations' costs will eventually bankrupt the public company. It's a downward spiral of high overhead, without offsetting income.
The reverse merger shell buyer seeking a fund or angel to do a Private Placement almost always fails. The potential investor should realize that the public company will be spending more money on investor relations in the year they must hold their shares than they will usually receive from their investment in the public shell company. Logic and past experience correctly tells the investor not to risk their money in the Private Placement. The fact is less than 10% of the investors in reverse merger private placements ever recover their risk capital.
A WISER PATH
If you are seeking a backdoor to becoming public in the United States, it isn't buying a trading shell. Doing so is a trap that will leave your company with few options in two to three years. There is a far wiser path for the CFO who understands the dangers of the Shell Trap. Learn it.
If you need help finding your way through the backroads of the public company process, you can email William Cate at: Beowulfinvestments@Earthlink.net
To contact the author visit: [http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
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/]
|
|
|
|
|
PR.com: Directory of Businesses Jobs Press Releases Products ... |
Comprehensive Directory of Businesses, Jobs, Products, Services, Press Releases, News, & Articles in all Industries. Promote your business. FREE. |
www.pr.com |
  |
PR Newswire - news distribution, targeting and monitoring |
News and press release distribution services for small business marketing, corporate public relations and investor relations, government and organizational ... |
www.prnewswire.com |
  |
PR Week Magazine |
News and features about the public relations industry, with links to US, UK, Asian, and German editions. |
www.prweek.com |
  |
Public relations - Wikipedia, the free encyclopedia |
Public relations (PR) is the art of managing communication between an organization and its ... PR historians say the first PR firm, the Publicity Bureau, ... |
en.wikipedia.org |
  |
Puerto Rico - Wikipedia, the free encyclopedia |
Hyperlinked encyclopedia article covers the country's history, government and politics, geography, economy, demographics, language and culture. |
en.wikipedia.org |
  |
The Public Relations Society of America (PRSA) |
Largest professional organization of public relations specialists representing business, consulting firms, government, associations, schools, ... |
www.prsa.org |
  |
CIA - The World Factbook -- Puerto Rico |
Profile of Puerto Rico by the Central Intelligence Agency (CIA). |
https: |
  |
Center for Media and Democracy - Publishers of PR Watch |
A nonprofit, public interest organization dedicated to investigative reporting on the public relations industry. |
www.prwatch.org |
  |
Puerto Rico Vacations | Puerto Rico Tourism Company | Puerto Rico ... |
Puerto Rico Tourism Company Official site includes nightlife, area sports, culture, and travel information. |
www.gotopuertorico.com |
  |
PR: See what people are saying right now on Technorati |
See all blog posts tagged with pr on Technorati. ... This page shows everything that has been tagged with pr. To contribute to this page include this code ... |
www.technorati.com |
  |
Edelman |
Full service global public relations firm. Includes company profile, management team, practice areas, industries served, case histories, client listings, ... |
www.edelman.com |
  |
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. |
www.lewispr.com |
  |
IANA | .pr - Puerto Rico |
University of Puerto Rico Gauss Laboratory Facundo Bueso Building Office 265 ... Puerto Rico Email: tech@uprr.pr Voice: +787 765 3263 Fax: +787 754 0757 ... |
www.iana.org |
  |
Online Public Relations Home Page |
Free online resource for public relations professionals. |
www.online-pr.com |
  |
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. |
www.ipr.org.uk |
  |
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 ... |
www.prnewsonline.com |
  |
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. |
www.odwyerpr.com |
  |
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 ... |
www.prandmarketing.com |
  |
Linux PR: |
Comprehensive Press Release and Public Relations resource for the Linux community. |
www.linuxpr.com |
  |
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 |
  |
|