Have been involved with many 504's over the years. Usually the company has some operating history and a strong story and management. In this way, larger blocks of a 504 offering can be sold to high net worth individuals or firms that look for this type of deal. Do alot of DD on any company I get involved with, meet management, see facilities, etc. Usually shares are available at a 50% discount to the offer price. By the way, you can get automatic registration by filing with S&P or Moody's, for about 33 states.
I'm not sure what "people" you're referring to, but usually 504 investors are fairly sophisticated and do their own due diligence. Small shareholders (i.e. in the under $100k amount) won't usually get involved unless the stock is already trading, or they know the company principals personally. Most of us don't have that many friends..
You're right -- The key is getting the 15c-211 filed, which usually requires deposit of some of the shares with the firm for trading. These days you can't file without a financial statement. Even tho it's illegal, some firms won't file unless they are given shares, which they usually have paid to the holding company that owns the firm, or via a "consultant".
Another key to 504 success is promotion (not the "hype" type, which involves lies and false expectations) of the facts about the company to audiences of prospective investors. Lots of firms exist for this purpose and some actually do a good job. My experience is that those that want an up front payment or large monthly fee are phony or poor performers at best. They tend to take the company's money and little happens.
AS for reverse mergers, they are a time bomb. Even if you think you know where all the shares are and who holds them, you're in for alot of surprises, since the minute the stock moves, old-shareholders are going to dump their previously without value shares and the market is kaput. Or the shell could be from a slick type who has shares deposited in a lot of accounts and names, who again does the same thing... sell you down the drain.
Making any deal with shareholders to sell and kick-back to the company is absolutely illegal. This is a perfect way to guarantee the company principals free room and board at ClubFed.
Would love to hear other experiences with specific 504s. Many of the companies with SI threads started this way. |
