14. The Rockford Short Sale: An investment firm buys shares and takes physical delivery of stock certificates. They replace real share certificates with counterfeit share certificates. Next they sell real shares back into Market and repeat process. This practice does wonders for their balance sheet. The tactic was popularized in Rockford TV Series. It's been done in Asia with NYSE shares.

15. The Tax Haven Bank Short Sale: Small (usually Caribbean) banks act as agents for their clients unwilling to reveal their identity. The client wants to buy stock. The bank doesn't buy stock on behalf of client. They simply show sale within bank's accounting system. This practice extends to gold etc.

16. The Lost Certificate Short Sale: Client requests share certificate. Broker sends it certified to slightly wrong address. It's returned to broker. Using certified receipt broker claims client has share certificate. A year is spent in proving it never arrived. Meanwhile broker has share certificate and can use it to cover other short sales. This happened to me in Vancouver.

17. The Margined Short Sale: Buyer buys stock on margin. They can't take physical delivery of their share certificates. The broker sells margined account non-existent stock (a short sale).

18. The Takeover Short Sale: Brokers add non-existent stock into a takeover with stock transaction. The buyer pays for non-existent shares. The short seller gets cash or stock in buyers company.

19. The Attrition Short Sale: For OTC stocks about 3% of beneficial owners of stock disappear each year. They die, forget they own stock, etc. Brokers can safely sell short 3% of float each year relying on fact that beneficial owners will never claim their stock.

20. Counterfeit Stock: Professionals regularly send counterfeit share certificates to Transfer Agents. A surprising percentage are accepted as real share certificates. The result is professional effectively has sold short shares involved in certificate.

21. Issue Depository Receipts without holding stock and sell Depository Receipts.

22. The Warrant or Option Short Sale. Buyer holds right to exercise warrants or options, but doesn't do so. Instead, they sell short stock and use options or warrants as insurance. This was popular among VSE underwriters in 1980s-1990s

23. Reg S Short Sale. Same format as Warrant or Option Short sale, but using cheap Reg S stock. The short seller is exposed for one year.

24. The Lending Short Sale. This was used by guy who introduced me to business. You offer to lend 90% of face value of stock to borrower for a long period of time. Your interest rate is better than that of a bank. You take in stock and sell it. You lend 90% of proceeds from sale. You are now short stock. You collect your interest payments until borrower defaults on loan.

To contact author: Visit Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visit Global Village Investment Club Website: [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]

1. Initial Public Offerings (IPO)

Over eighty-five percent of companies that go public use IPO process. The good news is that your company will get a multi-million dollar cash infusion when underwriting succeeds. The bad news is that half IPOs fail and private companies with cashflow less than $5 million rarely qualify to start IPO process.

If you are unaware of costs of doing an IPO, here's my article in "Equity Finance Solutions" from Volume 3 Number 10 (10/99):

----- * IPO Costs The following data is taken from "Going Public" by James B. Arkebauer (1994) and IPO cost website at: http://www.intranet.ca/~tgil/p2.html You should keep in mind that costs vary based upon complexity, size of underwriting and history of private company. The following IPO costs would be reasonable for a company with over $2 million in gross revenues and a 3-5 year operating history. A startup company would pay less than half this estimate to do an IPO. In some cases one or both sources acknowledge a cost listed below, but fail to offer an estimate. In those cases, I've supplied an estimate based upon my IPO experience.

Pre-IPO Costs$300,000 Legal Costs$175,000 Accounting$80,000 Printing & Mailing$100,000 Translation$30,000 Market Prep Costs$90,000 Investment Bankers$50,000 Consultants$50,000 Moody's or S&P$6,000 Blue Sky Fees$20,000 (California only) Transfer Agent$2,000 Mgnt & Admin$200,000 SEC Filing Fee$5,000 Taxes$15,000 Total$1,123, 000

Underwriting Costs The underwriting cost is a function of money raised in IPO. The NASD allow up to 18% in costs. If gross revenue from IPO is $10 million, this is an underwriting cost of $1.8 million.

Here's how costs breakdown Nonaccountable Expense 3% Accountable Expense 5% Discount 10% Company supplied IPO buyers usually 50% (10%-90%) Commission 5% - Its paid by brokerage firm client and doesn't affect money received by company. ----

Unless your private company is grossing over $20 million a year, doing an IPO doesn't make sense.

Shells

You can buy an OTCBB Trading Shell for about $150,000. If you are experienced in shell purchases, you will employ professionals to evaluate shell. This will cost you another $100,000. Unless you are very sophisticated, you must file an S-4 with SEC. This will cost you another $100,000. Expect to pay about $350,000 for your OTCBB Trading Shell. Expect to buy a dirty shell. Look for hidden stock, pending lawsuits and off-line debt. I'm among professionals that buyers use to evaluate shell purchases. My advice to a shell buyer is "Buyer Beware!"

The alternative to buying an OTCBB shell is to do a reverse merger. This allows insiders of shell to keep their stock. This strategy was popularized about a decade ago. It's worst option ever devised for going public. The past insiders sell their stock into public market created by new shell owners. It's rare that new owners create enough buying to overcome this selling. The share price collapses and private company and public small capital investors are losers.

The retail price of a reverse merger deal is often below $100,000. There's no reason to have professionals evaluate purchase, since you've agreed to buy shell sight unseen. The SEC filing costs will be around $100,000. Budget about $200,000 on front end to do reverse merger. Budget about two million on back-end to buy stock of shell's insiders.

A wary buyer can't be protected in a reverse merger. If you do a reverse merger, expect to be a loser.

Spinoffs

The 1934 U. S. Securities Act states that any private company with more than five hundred American public shareholders must become a reporting (public) company. Over years, SEC has used Courts to limit effectively this option to Private Companies whose shares are distributed by a Public Company with over five hundred American public shareholders. The process has become known as a spinoff. There are tens of thousands of examples of successful spinoffs. They range from AT&T's spinoff of Lucent Technologies to my dozens of OTCBB companies. If you visit SEC's website, you'll find five hundred shareholder rule.

Because a spinoff is created by paying your stock to public company's shareholders, spinoffs are clean. You don't have to worry about hidden stock. There are no more shares in your spunoff public company than those distributed by public company. The spinoff sponsors public company can be sued. The spinoff sponsors insiders may have hidden millions of warrants. The spinoff sponsor may have off-balance sheet debts. You don't care. You aren't responsible for these problem, if they exist. Spinoffs are clean. It's why I favor using them.

It costs money to do a spinoff. You need an audit for your private company. An attorney must file spinoff documents with SEC. Your public company must be rated by S&P or Moody's. You need to print share certificates and use a Transfer Agent. If you lack contacts, you need a consultant to find a Market Maker and arrange a Private Placement financing for your public company. If you do a spinoff, you should budget $150,000.

Funding Shells and Spinoffs

Successful IPO's come with a built-in infusion of money. It's one reason they are so expensive. If you go public with a shell or spinoff, you must find a Private Placement funding source. When you offer investors stock and not steak, your odds of finding investors greatly improve.

If you want professional help to raise money, expect to pay for it. My advice is to find a consultant to arrange a spinoff and find a Private Placement. I offer service. I raise a million dollars from European Private Placement sources. You can decide to go public with a shell. If you use a shell, ask your market makers and investor relations firm to find "accredited investors" for your company. If they can do it, expect to pay a retainer against twenty-five percent of money raised.

Going Public

1. It takes money to raise money. If you aren't willing to pay retainers, don't waste attorneys, accountants and consultants' time. They won't help you. 2. IPO's are costly and beware of buying a shell. (Edited to 1,500 words)