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However, that's only
beginning of your problems. Your reverse merger public company must now find buyers, each quarter, for those past insider shares. Assuming you can maintain same $4 share price, estimated annual investor relations costs will be $12 million per year, in addition to any other shares in public float. This $12+ million investor relations cost will continue as long as 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 buyers are certain that their shares will trade. The major disadvantage is that 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 buyer also inherits future costs of finding 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 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 ongoing investor relations costs of any public company strategy.
Most professionals in 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 formula for a win/win public company strategy. The public profits. The insiders and private placement investors maximize their profits.
About 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
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/]
