Going Public Options

Small companies that currently have between $0 and $10 million in revenue face a very difficult road in order to access capital markets for money raising activities as well as finding an exit plan for the stock they own. These two reasons are typically the foundation for going public.

With a small emerging company one has several choices. You can spend thousands of hours and energies traveling the country and meeting with investment bankers and or brokerage firms to evaluate your company only to find out that your company is too small. In this day and age, investment bankers can be extremely selective as to whom they bring public. If your product can't detect a bomb or prevent terrorists from causing mass destruction then chances are very high that most investment bankers won't even look at you. So what are your choices at this point?

You have two choices. The first is to hire an attorney to draw up the necessary documents for you to go public. Remember, that you must have a basis for free trading shares. This means, that if you decide to go public without raising any capital in an offering then no regulatory body will ever give you approval to trade because there are no free trading shares.

In order to have free trading shares, you must have completed a 504 offering in the past for approximately $500,000+ or have an aged (over 1 year) 505 or 506 offering completed. Keep in mind that you should have at least 50 shareholders before you submit and also keep in mind that you cannot just give shares away to people in order to hit the 50 shareholders because that is called a distribution and is not looked at favorably. One more thing, no one shareholder or two shareholders can control more than 10% (this is a figure I use) of the float. Are you exhausted yet?

Let's continue. The best thing to do is to have your attorney assemble a 504 offering memorandum and sell it to investors. Small note: Most states require you to sell to accredited investors which are investors that have over $1,000,000 net worth and or a net income of $250,000. Some states allow you to sell shares to up to 30 non-accredited investors.

Upon completion of the offering, your attorney will need to arrange for a cusip number, transfer agent and a market maker to file the necessary 15c211 paperwork. Keep in mind that these are just some of the steps necessary in order to become a publicly traded company.

The Other Option:

Lots of publicly traded companies large and small have failed for a variety of different reasons. In some cases the existing company just can't seem to get the company above water. Eventually, these companies seek an acquisition to take over the publicly traded company, better known as a shell.

I would recommend one major rule when searching for a shell, especially a pink sheet shell; make sure the company is auditable. Don't forget that rule.

Prices of shells, whether they are bulletins and pink sheets depend upon several factors:

1. Supply and demand of available shells
2. Percentage you wish to retain at the end of the day
3. How clean the shell is (Lawsuits pending/liabilities... etc.)
4. Flexibility of the controlling shareholder
5. Business plan of the incoming merger candidate

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