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It may not be
as exciting or glamorous as an Initial Public Offering (IPO) but,
the end results can be as effective and often more
rewarding.
Things to consider:
Flexibility:
Non-reporting
public corporations, with less than $25 million in revenues, can
raise up to $1 million in "seed money" annually - without
registering the offering using a 504 exemption. Or, they can raise up to
$5M using a 505 offering.
A public corporation can
undertake a fully registered "follow-on" or "secondary" offering, of
any size, at any time, by filing the appropriate documents with the
SEC and securing the services of a couple of market makers /
brokers.
Once a market value is established for your
stock you
can use these securities to capitalize other acquisitions or as
collateral on loans or lines of credit.
Venture Capital groups who underwrite offerings have
two exit strategies; drive the business to a major IPO or sell it
off to a larger corporation. Either one will generate maximum ROI
and that's what they're in it for..
Control:
Using a shell corporation and a
reverse merger strategy puts the control of the entire process into
your hands. You decide where, when and how things will be
done.
Few owners consider the
effect that the loss of primary equity and decision-making control
will have on their business when they work with an underwriter to do
an IPO. The first job of a underwriting company is to protect their
profits and their institutional client's investments.
Remember, you'll only do one IPO, the underwriters may be doing one
each week..
Costs:
Acquiring a
shell corporation, completing the merger and 504 or 505 offering
documents can be done for less than $60K.
Based on doing a below average IPO of $15M the costs
to implement will be about $1.5M or 10% of the offering. About 50%
of this is out-of-pocket. The current average IPO offering is
running $150M
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