Private companies have a difficult time raising capital in any economic climate. Today it is even more trying than ever.
Public companies on the other hand can raise capital through PIPE financing(private investment in public equity) in almost any economic climate. The main reason is the liquidity a public company offers its investors. The shares that an investors receives in exchange for his capital are freely tradable and can be sold on the open market. Private shares in privatre companies are restricted and cannot be sold or transfered.
There are two methods of taking a company public other than an expensive and time consuming IPO process. First, you can conduct a reverse merger with a public shell. The draw back here is that shells cost $500,000.00 cash or more plus 10% to 15% equity. The other less expensive method and one gaining ground is an S-1 Registration which cost $100,000.00 or less and 4.9% equity.
So why would anyone use a shell and spend $500,000.00 to go public? Mostly you have shell brokers peddling shells with missinformation. They tell you they can have you trading in 30 to 60 days and an S-1 registration takes 6 months. What they fail to tell you is that with the recent changes in SEC regulations is that once you complete a reverse merger you have to report it with an 8-K filing within 4 days and file a disclosure statement with the same information and audited financial statements as required with an S-1 registration. So why not just file an S-1 registration statement to begin with and save $400,000.00 cash and alot of equity.
The shell brokers don’t tell you this because they want the 15% equity in free trading shares and as soon as a trading market begins with your stock they are selling and forcing the price down. They make money and you have a shell for hell.
MBCapital.net will prepare an S-1 registration, build your shareholder base, provide capital and provide market support for you stock. Contact mikebrette@aol.com for more information.
Tags: capital markets, go public, PIPE financing, public shells, raise capital, reverse mergers, S-1 registration
