Burying Your Company's Stock

Written by William Cate


Continued from page 1

Keeping Your Float Private

Stoppingrepparttar American public shareholders from selling their shares (the float) in your public company is more difficult. I believe it can be done. You must eliminate your shareholders potential for loss. You must pay them to keep their shares. And, you must educate them torepparttar 112450 fact that their greatest profit will be realized whenrepparttar 112451 insiders sell their shares atrepparttar 112452 time ofrepparttar 112453 company sale or merger with a larger company. If they know thatrepparttar 112454 insiders have agreed not to sell, they're far more likely to go along withrepparttar 112455 program, too.

Your public shareholders can avoid loss by selling half of their position whenrepparttar 112456 public company's share price doubles over what they paid for their shares. The shareholder has his risk capital returned and now has a cost-free investment in your public company. His original risk capital is now available for another investment. Ifrepparttar 112457 initial buyers of a stock do it, you have reducedrepparttar 112458 float by 50% andrepparttar 112459 Effective Float is half ofrepparttar 112460 float. Ifrepparttar 112461 second group of buyers follow this practice,repparttar 112462 Effective Float is 25% ofrepparttar 112463 float. Your company has cut its Investor Relations costs by 75%. Those funds are, instead, available for further company expansion.

What Do You Offer Them?

Convincing your public shareholders to hold their shares requires that you pay them to do so. The cash dividends paid by major public companies are investor relations' costs to achieve this goal. Your smaller public company can't afford to do it since your profits need to be used to build your company. The solution is to pay your shareholders in tax-free benefits that meet their living needs. The VCP plan is to offer your registered shareholders a package of annual benefits worth about US$2,000. Thus your public shareholders are paid to keep their remaining shares in your company out ofrepparttar 112464 hands ofrepparttar 112465 DTC and to hold them until your insiders exit your company.

What's Your and Your Shareholder's Payoff?

M&A (Mergers and Acquisitions) announcement drive any public company's share price up. It's a fact recognized by anyone with any knowledge ofrepparttar 112466 Market. The benefit ofrepparttar 112467 M&A share price appreciation ensures that your insiders receiverepparttar 112468 highest possible price for their shares. It ensures that your public shareholders maximize their profits by also gettingrepparttar 112469 highest possible price, too. Everyone wins when you bury your company's stock and build your company's balance sheet.

The combination of no downside risk, tax-free benefits and maximum potential profits arerepparttar 112470 keys to burying any company's shares. Applying them to your public company means that you can have a strong and sustainable share price with reasonable Investor Relations costs. And you can hold your share price firm as long as it may take to achieve your exit strategy.

To contactrepparttar 112471 author: Visitrepparttar 112472 Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visitrepparttar 112473 Global Village Investment Club Website: [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]



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/]


The Correct Use of Shares

Written by William Cate


Continued from page 1

* The OTCBB (Over-the-Counter Bulletin Board Stock Exchange is far less credible than NASDAQ, AMEX,repparttar NY Stock Exchange or any American Regional Stock Exchange. Investor Relations costs will be lower ifrepparttar 112449 company trades on a strong American stock market, precisely part of our program. ** The SEC's Penny Stock Rules don't apply to shares trading over $5.00, ensuringrepparttar 112450 less stringent rules make Investor Relations efforts more effective. *** The Florida Rule is more accurate for stocks trading below $10.00 than for those trading over $10.00. In fact,repparttar 112451 costs are usually lower thanrepparttar 112452 Rule suggests.

(Beyond a $20.00 share price, you will probably not attract many small capital investors,repparttar 112453 target audience for smaller companies.)

For example, if you assume a float of 2 million shares and a US$4.00 average share price,repparttar 112454 public company's annual Investor Relations budget should be about US$2,000,000.

How NOT To Pay For It

Many Small Capital public companies try to manage their Investor Relations costs by paying for them in shares ofrepparttar 112455 company. Aside fromrepparttar 112456 fact that this violates an SEC regulation, it works againstrepparttar 112457 company. It's no different than having insiders sell their company stock. Those paid shares add torepparttar 112458 company's float, increasingrepparttar 112459 company's Investor Relations costs inrepparttar 112460 following quarter.

The REAL Cost of Legal Insider Selling

So here's where I repeat that promised sentence: When your public company insiders sell their shares torepparttar 112461 public, they add that many shares torepparttar 112462 company's float.

Let me give you a simple example. If one ofrepparttar 112463 company's insiders decides to sell 1,000,000 shares of his stock intorepparttar 112464 market place at a price of $10.00, he will profit by $10,000,000. Very nice, you might say.

But what he has actually done is to increaserepparttar 112465 next quarter's Investor Relations cost by $450,000 without adding one single cent of value torepparttar 112466 company. He has also increasedrepparttar 112467 public float by an additional one million shares, now your float is 3,000,000 shares instead of 2,000,000. The cost of your Investor Relations Program has been permanently increased by $1,800,000 annually without any benefit torepparttar 112468 company. Few Small Capital public companies can afford to pay this bill for very long. It usually leads torepparttar 112469 collapse ofrepparttar 112470 company's share price in a very short time.

This is exactly why I will not invest in companies, which permit their insiders to sell stock whenever they choose. I believe it to be an unethical and destructive practice. Whilerepparttar 112471 insiders benefit, they do so atrepparttar 112472 expense of their shareholders.

The Correct Way To Use Insider Stock

If you see taking your company public as a way to an exit strategy, there are only two proper uses for your public company's "non float" shares. (1) You can buy cash-producing assets with your shares. (2) You can leverage your profits onrepparttar 112473 company's sale when you sell it.

A License To Print Money

As a U.S. Public Company, you have been given a license to print your own money. That money is your company's stock. Your stock is convertible into U.S. Dollars at whatever exchange rate you can achieve with your Investor Relations Program.

You should use that money to buy private, cash producing companies. The cash, as well asrepparttar 112474 perceived value ofrepparttar 112475 acquired company, adds to your public company's revenues and torepparttar 112476 perceived value of your company. Most importantly, using our program, you can ensure thatrepparttar 112477 issued shares never become part of your company's public float. You increase bothrepparttar 112478 actual and perceived values of your company without increasing your Investor Relations costs. With your company being publicly seen as more valuable, it makes it far easier to resell stock when one of your public shareholders decides to sell.

Your Public Company's Appraisal Value

Using a variety of business appraisal formulas, private companies are valued on their balance sheets. Public companies, however, are valued on their Market Capitalization, which isrepparttar 112479 public company's issued shares multiplied byrepparttar 112480 company's average share price. Thus a total issue (insider and public float) of 10 million shares at $10/share is considered a $100 million company.

Long experience has shown that Market Capitalization is almost always a multiple of at least four times overrepparttar 112481 company's balance sheet valuation. If you can sell your private company for $20 million, you can usually sellrepparttar 112482 same firm as a public company for $80 million.

The most logical reason to take your company public is because you can use your shares to grow your company quickly by buying cash-producing assets with those shares. When you are ready to sell your company, you will get at least four times its balance sheet value by selling it at Market Capitalization. These arerepparttar 112483 only two correct uses of your company's insider shares.

To contactrepparttar 112484 author: Visitrepparttar 112485 Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visitrepparttar 112486 Global Village Investment Club Website: [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]



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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