This appears to be crunch time. Some people have made a bit of money and some have lost some to this point. A dip was to be expected after the introduction to the buying public. Is it over? My gut tells me, yes--but I must admit I am watching this one a lot. It seems to be at that stage where something crucial is going to happen and these often are the times that we look back at a stock and say "I had a feeling about that one and came real close to buying it" The dilemma, of course is whether to buy, sell, or buy more.
Does anyone have access to data on the number of shorts out on CULE? I am curious--it would be advantageous to track that activity as well the long market. If anyone can come up with that, I, for one, would really appreciate it. If it's being shorted, and it could well be, one has to wonder how much it will take to cover it and prevent the stock running away from them. One of the adages of investing is not to short Micro caps. This stock has never traded below here, even as MNGD, to the best of my knowledge.
Ben posted a link a couple of days ago and I thought it would be good to paste it here. Interesting and informative. I'm not making any connection to CULE but simply providing it as a source of general information. I am hoping to free up a little cash tomorrow and if I can, I am going to buy what I feel is cheap stock.
Regards,
Dan
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Rule 504
This rule is considered by many as the perfect answer for the company just starting out that needs to raise less than $1 million but can't afford to go through the whole SEC registration process. Until they grow to a point where they can afford it, Rule 504 offers such companies an out:
An exemption to raise up to $1 million
No disclosure criteria
Few general solicitation and resale restrictions
No limit as to the number or type of investors
Actually, Congress's original intent in 1982 for Rule 504 was to "set aside a clear and workable exemption for small issuers to be regulated by state blue sky requirements, but by the same token, to be subjected to federal anti-fraud provisions and civil liability provisions." Rule 504 exemption is provided for almost any type of organization, including corporations, partnerships, trusts, or other entities. However, it is not applicable to companies already reporting to the SEC (subject to the '34 Act) or investment companies.
You Cannot Exceed $1 Million. The total offering amount under Rule 504 can be up to $1 million in a 12-month period, less the aggregate offering of all securities sold within 12 months before the start of a 504 offering. So, if a company has raised $100,000 in private money in the previous 12 months, it can still raise up to $900,000 without being accused of breaking the rules, or integration.
Generally speaking, there are no specific disclosure requirements under Rule 504 (disclosing what the company is about, what it intends to do, or who is connected with it). This means that, theoretically, an issuer can have a purchaser sign a subscription agreement and purchase stock without any information about the company being disclosed. However, the rule is dependent on the blue-sky laws of each state in which the securities are offered. This means that if a state's blue-sky rules require disclosure, it must be provided regardless of Rule 504.
Rule 504 also provides that at least $500,000 of securities must be sold pursuant to a registration under a state's securities law. Consequently, an offer must comply with the blue-sky laws of each individual state in which it is offered. In many states, this negates the effective simplicity of Rule 504 and the federal government's intent, because many states' blue-sky laws are more restrictive than Reg D.
A word of caution to the entrepreneur--regardless of the amount of disclosure the issuer is willing to provide, Rule 504 does not dismiss the issuer from the federal requirements, nor is there an exemption from the fraud provisions, including the areas of material omissions or misstatements. The penalties for noncompliance are severe, including monetary fines and mandatory jail sentences.
The one area in which Rule 504 has helped is in allowing the issuer to generally solicit, or advertise, for subscribers to an offering. Some states have been quite lenient in allowing it. However, in practice, very few issuers have advertised their offerings in newspapers or through other common media as was expected.
Number of Investors. With its limited disclosure requirements, Rule 504 also allows an issuer to sell securities to an unlimited number of investors. Theoretically, a company could raise $1 million by selling its stock at a penny a share to 100 million different investors. Obviously, the economics are not too attractive, but there's no rule that stops an issuer from selling $500 blocks of stock to 2000 investors. Rule 504 is the only rule under Reg D that permits an unlimited number of investors.
A final note on Rule 504 is that the exemption provides for sales of securities of either debt or equity. This opens the door for combinations of both via convertible debentures. By way of explanation, convertible debentures are a debt issue (debenture) that is convertible to a preferred or, most commonly, common stock at some future date, usually at a predetermined price. |
