The reason that you must bury your public company's shares is to reduce your company's float. The lower your public company's float, lower your investor relations cost. [See my article The Proper Use of Shares.] The buried shares are deducted from your float and balance is called effective float. Your goal is to reduce effective float to as near zero as possible. If your effective float is zero, you need not find buyers for your float because there are no shareholders selling their stock in your company. This, of course, is ideal situation. I suggest that if you want your public company to succeed in all aspects, you may want to structure your company's float like this.

Speculators, Not Investors

American stock buyers, on whole, are speculators, not investors [http://www.iht.com/articles/529443.htm]. They buy stock with hope of quickly selling it at a profit. Even U.S. Government realizes that speculation doesn't lead to economic growth. Taxes for stock buyers willing to hold their shares for at least one year are less than for those who speculate in Market and quickly sell their stock. The American Government's tax incentive hasn't altered speculative nature of U.S. Market, because long term investors are consistent money losers. I've often wondered why these long-term investors continue to buy and hold shares in such a manner?

Avoiding Having Your Shares In Market

My over 20 years involvement in North American stock markets have proven to me that Market professionals make more money selling stocks short (betting that price of shares will go down and company will go bankrupt) than they do by buying shares. The textbooks only list one of over two dozen of ways that professionals use to sell short stocks. (I have written a short selling article that lists twenty-four ways to short shares.) The only effective defense to short selling is to ensure that Depository Trust Company (DTC) in New York doesn't have any of your company's shares in their possession.

When most people buy shares, they leave them "in street name" rather than taking possession of share certificates. "In street name" simply means they are all turned over to DTC for safekeeping. Short sellers "borrow" or otherwise rely on existence of street stock to sell nonexistent shares into company's market. Public short sellers expect to pay "borrowed" shares back at much lower cost when stock collapses. Professional short sellers never expect to buyback nonexistent shares and legally avoid U.S. taxes on their profits in doing so. If shares are not there to be borrowed, your company can't be sold short.

If your company can keep your shares away from DTC, by having all your shareholders demand physical delivery of their share certificates, your company is said to have a Cash Market in its stock. Few companies bother or understand dangers they run from short sellers. Brokerage firms and DTC work very hard to make it extremely difficult to create a Cash Market in any stock.

Burying Insider Shares

Textbooks on Going Public in America advise that being published is an exit strategy for a company's insiders.

The textooks are wrong!

If you follow their advice, in time you will destroy your public company. (98% of all companies going public in United States fail within ten years.) In doing so, you will destroy our public shareholder base. Let me show you why this happens.

The Float

The shares held by public are called "the float." When your public company insiders sell their shares to public, they add that many shares to company's float. Remember that sentence. I'm going to repeat it further into this explanation.

Who Sells Your Company to Public?

Every public company is totally responsible for finding buyers for their float. No one else will do it for your company. This responsibility begins even before company actually goes public and remains throughout life of company.

If your company fails to do this, company will quickly go out of business. In order to find those buyers, company must spend money. (And important rule to be remembered here is that "Stocks are NOT bought. Stocks are SOLD!" With thousands of companies offering their stocks to public, your Investor Relations efforts must be aimed at getting buyers with limited investment funds to choose YOUR company's stock instead of another company's stock.)

The money spent finding and convincing those buyers doesn't create any additional revenue for company. It's simply part of cost of doing business as a public company. Tens of thousands of public companies have not paid their Investor Relations bill and, instead, have paid ultimate price of doing business. They have failed and disappeared.

Stick with me now, as I'm going to explain how these costs re figured. They remain pretty much same for and all public companies and have been learned through long experience.

Figuring Your Costs

The actual cost to our public company to find buyers for float is a simple multiple of two things: (1) number of shares in float and (2) your company's share price. So greater number of shares in float, or higher your company's share price, more money your company must spend to find buyers for company's shares.

Simply to maintain share price in most public companies requires company to find buyers for float every quarter of year. (Investor "A" may have an illness in his family, which requires shareholder to sell some stock, let's say 1000 shares. The public company's Investor Relations program must find potential investors and promote company to those potential buyers for that shareholder's 1000 shares of stock. If they fail to do so, share price will drop. The falling share price will encourage other shareholders to sell their stock. If buyers can't be found, share price will continue to fall. Eventually, shares will trade for less than once cent and company will be delisted from stock exchange.

The Company Isn't Only One Issuing Shares

Most shareholders leave their shares with Depository Trust Company (DTC) in "Street Name." Their stockbrokers strongly encourage this practice since DTC pays them for doing so. However, shares held in "Street Name" are used by "short sellers," professionals who are betting that your company's share price will go down. These shares, "borrowed" from DTC, are sold into company's float. As long as that short position exists, company is required to find buyers every quarter for short shares. A multimillion-share short position will destroy strongest public company in time.

Thus primary concern for any Investor Relations program is to encourage company’s shareholders to take possession of their stock certificates and remove those shares from DTC. If there is no stock in "Street Name," there can be no short selling. Our program is focused on reducing stock held by DTC in "Street Name" to less than 20,000 shares. This policy limits potential short selling and thus ensures that investor relations costs are manageable.

The Formula

Here is simple formula for figuring Investor Relations costs to sell your company's shares: Float X FR X 4, where FR (known as Florida Rule)*** is a constant based on company's share price.

This constant starts at ten cents per share per quarter for shares trading under US$1.00 and is adjusted upward by five cents for every dollar increase in average share price to US$5.00/share. There is no increase in cost to US$7.00/share. Then increase again climbs five cents for every dollar of share price up to US$20.00/share.

Here is a simple cost analysis chart that assumes shares are trading OTCBB*:

Share PriceCost/QuarterCost/Year