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Microcap & Penny Stocks : 504 Reg D and Beyond - Going public without an Underwriter
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To: Chloe R who wrote (24)7/2/1998 12:07:00 PM
From: micky  Read Replies (2) of 50
 
The purpose of going public is to have access to money for the company (vs private financing, venture capital, etc.) via the stock market. In order to make money for investors who are willing to put up their capital, the company can give them a piece of any declared profits and/or create a market for the shares so the initial investor can sell their shares to someone willing buy them at a higher price than they paid for them.
So, a private company wanting to raise capital by issuing shares (which costs them nothing other than applicable fees) must have a market for those shares, i.e. go public. They can either just register the existing company via a 15c-211, or purchase a defunct public company, known as a shell, via a reverse merger.
The 504/505 etc. part is the money raising part. A company can issue treasury shares (and get the money it receives from their sale) before or after going public, but generally won't find investors unless they are committed to becoming or are already public. Doing a 504 to go public therefore means just listing the existing company and having an associated private offering. This is a different method than purchasing a shell and then having an offering in the new reverse merger name.
As a rule, IMO, the former is simpler and cleaner, especially for a real company with good fundamentals, as there is no history or ghosts from the defunct shell to deal with, and costs generally are lower.
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