Exit,Strategies,for,Public,Com finance, share, loan Exit Strategies for Public Companies
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Exit Strategies for Public Company InsidersBy William CatePublished January 2001[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] There are three ways that public company insiders can convert theirequity into cash.1. They can sell their stock to the public. This is the goal of theinsiders in most OTCBB and Nasdaq Small Cap Companies. It's summarized in the axiom "Pump & Dump." The stock is promoted as the insiders sell their shares into the public buying.The SEC has spent 60 years trying to stop this practice. We haveinsider trading rules that ban it. Yet, the insiders' goal, in over 80% ofthe OTCBB companies, is to dump their stock on the public.This strategy is unprofitable for the promoters. It's not that thepromoters face undue risk from an SEC investigation. The odds of a highflying turkey being investigated are about one-in-ten. The profits forinsiders in "Pump & Dump" schemes are small.It costs money to promote stock. The insiders illegally pay outsidepromoters with part of their free-trading shares. The average "Pump & Dump" company insider nets less than $150,000 from the stock promotion.For example, the Canadian media believes the Bre-X Scandal was thebiggest mining stock scam in history. These newspapers reported that onlyone insider made more than a million dollars from it.2. The insiders can create an industry giant. It will qualify totrade on the New York Stock Exchange. The insiders and their heirs can liveoff their dividends and the occasional sale of a few shares of their stock.This is the Capitalist ideal. The insiders will retire multimillionaires.Since 1945, a few companies, like Microsoft or Apple, have madethis journey to success in less than a decade. For most companies, it'lltake them a lifetime to reach their goal. The insiders of these companieshave better odds of success in Las Vegas. This appears to be the"Impossible Dream" of about 5% of the companies trading on the OTCBB.3. The insiders can groom their public company as a takeover targetfor an industry giant. Our spinoff test insiders are creating amulti-dollar share price to allow them to fund their company. The equitycash infusion will be converted into cash-producing business income. Thestrong share price will be used to acquire cash-producing assets. In fiveto seven years, the company should have a hundred million dollars inassets. An industry giant will buy the public company based upon its shareprice. The insiders will retire multimillionaires.The odds of arranging a merger are better than the odds of creatingan industry giant. It takes less than ten years to become the perfectmerger candidate. It usually takes over 20 years to become an industrygiant. It makes sense to strive to be a merger candidate.In ten years, a promoter can run about four "Pump & Dump" publiccompanies. These promotions could earn the promoter about a half-milliondollars. The promoter could create one real company and groom it as amerger candidate. In ten years, the promoter can walk away as amultimillionaire.The most profitable strategy in going public is to build a companyand seek a friendly merger. It's this group of merger orientedentrepreneurs that I want to help.To contact the author: Visit the Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visit the Global Village Investment Club Website:[http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] Article Tags: Exit Strategies, Public Company, Pump Dump, Industry Giant
Exit,Strategies,for,Public,Com