FAMH @ .18- STOCK PROMOTION! Message Board

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Microcap & Penny Stocks : FAMH @ .18- STOCK PROMOTION!

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To: TINKER TAPE who wrote (65)	10/14/1997 9:14:00 PM
From: CO	of 277

Perry, An investment banker makes an agreement with a company to sell a certain dollar amount of shares to raise additional capital for the company. In order for the investment banker to do this, the company agrees to pay the investment banker a commission (say 15%) of the selling price. But the investment banker wants to provide his clients with an incentive to buy the shares, so the company allows him to sell those shares at a discount to his clients. EXAMPLE: The Ask price on a given day is .19 cents. The Client gets a 15% discount price of about .16 cents. The Investment Banker gets a 15% commission of about .024 cents (that's 15% of the .16 cents). So, in effect, the Investment Banker is "Buying" the shares from the company at .136 cents (that's .16 - .024 = .136) and then Selling the shares to his clients at .16 cents. The transaction shows up in the total volume for the day but the transaction really has little or NO effect on the NORMAL business of the marketmakers because they have nothing to do with it. This is called a "cross trade." Cross trades can also occur between marketmakers when one marketmaker needs to buy some shares from another marketmaker to "cover" a sale they have made to a shareholder. The volume is recorded as part of the total volume for the day, but it doesn't effect the NORMAL buying/selling activity in the market. Cross trades usually go off at a price BETWEEN the Bid and Ask. It is my understanding that Alexander Wescott is selling some shares to their investors to raise capital for the company so the company can proceed with their aquisitions, thus becoming an even more profitable company. The shares that are being sold are probably Restricted Shares. They CANNOT be re-sold for a specified length of time. Anyone buying the shares assumes the risk of adverse price movement during the restricted time. However, often these investors are longer term investors anyway. It is also my understanding that Alexander Wescott is a very reputable company, so I assume that they would not have agreed to raise the capital if it would not be in the best interest of their clients who are purchasing the shares. I'm NOT an expert in these things and I don't know the details of the agreement FAMH has with Alexander Wescott, but, to the best of my understanding, I believe this is how these things work. Cheryl

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