The Isolated Offering, Vol 9, Issue 4
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The Isolated Offering
A Newsletter of The Lebrecht Group, APLC
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| April 17, 2009 |
Volume 09, Number 4
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| In This Issue
FINRA Comments are Leaving Many Start-Up Companies “Shell” Shocked Five Questions to Ask Before You Go Public More Articles The Long Arm of the (Securities) Law Fair Disclosure During PIPE Transactions TLG Reduces Cost of Being Public Contact Us http://www.thelebrechtgroup.com 9900 Research Drive 406 W. South Jordan Parkway Forms
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FINRA Comments are Leaving Many Start-Up Companies “Shell” ShockedEver since the Securities and Exchange Commission (the “SEC”) amended Rule 144 of the Securities Act of 1933 (“Rule 144”) on February 15, 2008, we have noticed that during the comment phase of the application process to initiate or resume quotations in the OTC Bulletin Board, the Financial Industry Regulatory Authority (“FINRA”) has been more liberal in issuing the “shell” comment to small start-up companies; especially companies without revenues. The FINRA comment typically includes a statement that the issuer appears to be a shell company or was a shell company when it issued its shares because of its limited operations and nominal assets. In the same comment . . . [more] Five Questions to Ask Before You Go PublicFeatured Client Link:
Many of this firm’s clients are public companies. Most of the work we do involves either taking companies public, or assisting them with SEC compliance issues once they are public. We believe there are tremendous benefits to being a publicly traded company. But as a private company, before you jump off that cliff to being public, here are five questions you should ask yourself. 1. Is third-party funding an absolute must? When? Many of the traditional financing sources, such as PIPEs and small underwritings, are hard to obtain in today’s market. Traditionally, public companies had more opportunities for financing than private companies, and while this still is likely the case, if you must have third-party financing right away in order to carry out your business plan, you should expect it to take longer and cost more than previously. 2. Can I afford it? While estimates of the total cost of being public vary, for most smaller companies it is approximately $200,000 per year. This includes lawyers, accountants, and investor relations advisers that aren’t an expense while you are private. 3. Can I handle the pressure? In today’s environment, an officer or director of a public company can expect to have detractors ranging from critics to all out bashers on the Internet. And that doesn’t even cover the fact that your salary, benefits, and net worth (at least as it is tied to the company’s stock) are all publicly available. 4. Do I have explosive growth potential? For most companies, the value of their stock is based on their perceived future growth potential. Investors buy stock today hoping that good things will happen in the future to make the stock worth more tomorrow. Without that explosive growth potential investors and potential shareholders may be tough to attract. 5. Do I have the right advisers? Your existing accountants and lawyers are going to need, at a minimum, supplemental expert advice. The same might be said for your CFO. You will need an investor relations firm and probably new Board members, advisory board members, and an investment banker. Having a group that is knowledgeable, ethical, and works well together is critical to your success. |
