Methods of Going Public

Let's cover some important information on going public. As we explain the process, we'll be talking to you about taking your company public on the OVER THE COUNTER BULLETIN BOARD (OTCBB) and eventually to the major exchanges.

IPO - Initial Public Offering
There are three different methods of accomplishing your goal. The first method is called an “INITIAL PUBLIC OFFERING” (IPO). This is the method that most people associate with going public primarily because it’s the most prominent in the media. Large, established companies that have been in business for at least five years mainly use the IPO method. When a corporation uses the IPO method, the documents that they file with the SEC stipulate that they must raise a certain fixed amount of money. The reason we don't recommend this method is because if their filings declare that the company will raise ten million dollars, and they fail to do so for the entire amount, they are denied approval for going public. The entire amount of time and money spent, averaging between three hundred to five hundred thousand dollars, is forfeited – and they remain a private corporation. An IPO carries great risk. The first IPO avenue is called “BEST EFFORTS” in which the company uses its best efforts to raise the stipulated amount of money. Most companies that have not been in business for a long time and are not very profitable must use the “best efforts” program to launch an IPO because broker/dealers are not comfortable in guaranteeing that they will raise the stipulated amount of money for these unproven companies. The broker/dealers are like banks. They cannot afford to guarantee funds for many of the smaller companies. The second IPO avenue is called a “GUARANTEED OFFERING” and is used only by major, profitable companies that can get broker/dealers – stock brokerage companies – to guarantee that they will raise the required amount of money. Using the guaranteed method eliminates risk but is very expensive. More than one-third of the companies using the IPO method fail to raise the stipulated amount of money and so fail in their attempt to become a public company.

Reverse Merger
The second manner of going public is called a “REVERSE MERGER”. Your company purchases an OVER THE COUNTER BULLETIN BOARD (OTCBB) public shell which is currently selling for between $450,000 to $500,000. The process involves merging your private company with a public shell. You will then change the name of the public shell and get a new stock symbol from FINRA (that's the Financial Industry Regulatory Authority). Although this is the fastest way to get your company public, it is also very expensive.

DPO - Direct Public Offering
The third method is also the fastest and least expensive. It's called a DIRECT PUBLIC OFFERING (DPO). This is the method that we will use if you decide to take your company public. A DPO does not have the risk of an IPO. Furthermore, it's relatively inexpensive - the cost is from $60,000 to $100,000. Since we do so many, we only charge $60,000 for most organization and only a small piece of that needs to come out of your pocket. The rest comes from investors. There’s no real downside of a DPO versus an IPO.

Using the DPO method we will file the same paperwork with the SEC and FINRA as we do in using the IPO method; however we do not have to guarantee that we will raise a certain amount of money. Instead, we submit a registration statement to the SEC asking them to approve the company to raise $10 million over a 12-month period. Unlike the IPO, your company will receive SEC approval to go public and to raise the $10 million, but you do not have to guarantee that you will raise a set amount of money. Using the DPO method eliminates the risk involved in doing an IPO. You do not have to raise one cent. You will be receiving a registration statement from the SEC that gives you the right to raise up to ten million dollars or whatever amount you have put in the registration statement over a 12 month period. The beauty of the company having a registration statement is the fact that now you can go to the public to raise money. We can use the Internet, websites like “Raging Bull” and other financial chat lines, advertise in financial publications and using broker/dealers – stock brokerage companies – to raise money. The advantages of being a public company to raise money are numerous.

For just under sixty thousand dollars, we will take your company public using the DPO method and you will become an OTCBB public company. OTCBB companies are fully reporting public companies. If and when you qualify for NASDAQ, we can complete the process of getting your company listed there.

So, as we said, the main reason to become a public company is access capital and being able to advertise and raise money from the public through stock sales and substantially increasing your net worth. Private companies sell for about one and one-half times annual earnings. Growing public companies are usually worth between 10 and 25 times annual earnings or more.

Using the Direct Public Offering method of going public requires that you first get 35 to 40 small investors to invest in your Private Placement. These investors can put up as little as $1,500.00. We can help you with this. We suggest your share price be very low for these investors. We call these people “seed investors.” We are sure you would like to see your seed investors at the very least to double or triple their investment in a short period of time. Our legal professionals will produce a PRIVATE PLACEMENT MEMORANDUM (PPM) and Subscription Agreement for you and you will raise at least $60 thousand from 35 to 40 investors. The SEC requires a minimum of 35 to 40 seed investors.

Our consultants, securities lawyers and accountants will do 90 percent or more of the work in the going public process. We want you to spend your time building your business. There are other people who can take your company public but most will take a lot more time and charge two or three times our fees. We do not know any groups that are as good or experienced at investor relations or stock promotions in order to boost your stock price. We have great contacts and lots of experience in stock promotion so that your company stock will achieve maximum value.

We can take your company public as quickly and inexpensively as anyone. Here are the many advantages of taking your company public.

Public Company Advantages
-You raise money without creating debt.
-Experienced underwriters help you raise money.
-Increased public recognition and prestige – so more customers will buy from you.
-Credibility – audited financial statements and full disclosure generate public trust.
-Prestigious – CEOs of publicly traded companies are on the top of the financial pyramid.
-You keep control – you sell a small ownership percentage to raise money but you’re still in the driver’s seat.
-Gives “seed investors” an exit strategy – making it easy to raise money.
-Can give stock options to employees to get and keep talented people without using any cash.
-Dramatically increases the owner’s personal net worth
-Liquidity – public shares are easy to sell for quick cash.
-For less than $60,000 you create a fully reporting public company that you can later sell as a public shell for $500,000. So, even if your company does not succeed you are still way ahead of the game.
-Going public is FREE because the seed investors will reimburse you.
-Investor Relations – we have an investor relations team that can help boost your stock price.

One of the most neglected areas of officers and directors of public companies is Investor Relations. No one is standing in line to purchase the stock of a new, start-up that nobody's heard of. So, the new public company MUST have an investor relations plan and they need to execute the plan every single day. The corporation must work all arenas including print media. TV, radio, web site, direct mail, mass opt-in e-mailing and work with analysts who share their findings with the investment community. So, the stock price of our client’s corporation really depends on the amount of exposure it gets.

We work with our client’s companies to construct an investor relations plan and we'll be very active in promoting it because getting the word out and pumping up the price help you a great deal and is the only way we make money.

Now let’s talk more about INVESTOR RELATIONS (IR) and stock promotion. A lot of work has to go in to add an ingredient that is so important to your public company. This ingredient is called LIQUIDITY. You need to be able to sell millions of shares to raise money and increase the sales price of your stock.

We know that we've shared a lot of information and what we would like to do at this point is to put you directly in touch with the professionals who will work with you to take your company public. Give us a call at the number above so we can schedule a conference call through one of our consultants.