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Two years pass and whichever investment you chose is now in financial trouble. If you chose
private company across town, you will lose your million dollars if company declares bankruptcy.
If you chose public company in South Africa, you can sell your shares and recover your risk capital and possibly make a profit. The ability to sell your shares and control your risk is one major reason that you should have invested in public company. Investing in public companies offers you protection against loss, since public shares can be sold at any time after required holding period. This risk protection is called investment liquidity and is reason that you should only invest in public companies.
The alternative to possible corporate failure is business success. Five years pass and you made a wise investment and it is ready to be sold. Your investment has performed equally as well be it in private or public company. At time of your company's sale, your company's profit is $3 million/year.
The Private Company option gives you 50% ownership of money from sale of your private company. Your private company could sell for as much as 1.5 times its annual profit (considered by most business brokers to be a very high estimate). Your 50% ownership is worth $2.25 million. You have better than doubled your money in just five years. A great investment that happens less than fifteen times in a hundred according to U.S. Small Business Administration (SBA).
The public company private placement option assumes a public company merger with a multinational corporation. Your public company's shares should trade over $60/share at time of merger. At that price, your 1,666,667 shares will be worth over $100 million.
As an angel investor, you can invest in private companies and, with success, expect to better than double your money. Or, you can invest in public companies and, with equal success, expect to earn fifty-fold your investment in same time period. The public company choice is always wiser choice because it gives you liquidity should things go wrong and leverage should things go right.
The two reasons that every company should go public are (1) it gives insiders and investors leverage at time of sale of company. And (2), it offers liquidity to investors, should company start to fail.
GO PUBLIC!
INVEST IN PUBLIC COMPANIES!
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/]
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/]
