Cheapest way to become a public company

[premfan]

Hey Guys,

 

I'm wondering what is the cheapest way to go public? Also how much do you guys think accounting costs would be for a company that produced say roughly 200-275k cash flow a year?

 

premfan

[oddballstocks]

Buy a shell for $10-15k from a broker and do a reverse merger.  If you want to be OTC listed accounting costs would be no different than what you're already paying your accountant.

[premfan]

Thanks oddball. 

[Parsad]

Buy a shell for $10-15k from a broker and do a reverse merger.  If you want to be OTC listed accounting costs would be no different than what you're already paying your accountant.

 

Shell will cost you a lot more than that.  You also have to be careful what type of shell you buy, because there is still legacy liability risk depending on the type of business that operated under the shell previously.  Cheers!

[Morgan]

You also have to be careful what type of shell you buy, because there is still legacy liability risk depending on the type of business that operated under the shell previously.  Cheers!

 

Good point Parsad.

 

Is there a way to 99.99% guarantee that there won't be lawsuits from the past? I assume the issue is, you buy shell company that has done something really dumb in the past but is broke so it's not worth suing. Then eventually it makes a bunch of money and is worth suing from something the previous owners did? Or do you mean some other liability?

 

 

[DoddDisciple]

Why on earth would you want to go public? So many of these legitimate microcap companies want to go private.

 

You could list fee shares on Crypto:Stocks and deal only in BTC. That's the absolutely cheapest route. Just need an email address :P

[Guest deepValue]

Please let us know before the pump begins.

[premfan]

Why on earth would you want to go public? So many of these legitimate microcap companies want to go private.

 

You could list fee shares on Crypto:Stocks and deal only in BTC. That's the absolutely cheapest route. Just need an email address :P

 

Hey TTD,

 

I was just curious about the idea. Its something i pitched to the members. I'm thinking building a public track record and maybe getting financing easier could be a positive.  We got turned down for financing on a property where we had 30 percent down. It was distressed and 50 percent of the revenue was for staff payroll! Instead of 21 employees we figured the property only needed between 10-12 people. This reduction would have made the property cash flow positive.  The bank didnt accept that rationale.

 

Please let us know before the pump begins.

 

This is a family holding company which 95 percent of the assets are real estate/undeveloped land. If the cost makes sense i think floating 10 percent to the public might be worth it to build a public track record and maybe obtain financing easier.  Anyway i'm thinking out loud.  It all depends on the cost and how the others feel about it.

[Green King]

Why on earth would you want to go public? So many of these legitimate microcap companies want to go private.

 

You could list fee shares on Crypto:Stocks and deal only in BTC. That's the absolutely cheapest route. Just need an email address :P

 

Hey TTD,

 

I was just curious about the idea. Its something i pitched to the members. I'm thinking building a public track record and maybe getting financing easier could be a positive.  We got turned down for financing on a property where we had 30 percent down. It was distressed and 50 percent of the revenue was for staff payroll! Instead of 21 employees we figured the property only needed between 10-12 people. This reduction would have made the property cash flow positive.  The bank didnt accept that rationale.

 

Please let us know before the pump begins.

 

This is a family holding company which 95 percent of the assets are real estate/undeveloped land. If the cost makes sense i think floating 10 percent to the public might be worth it to build a public track record and maybe obtain financing easier.  Anyway i'm thinking out loud.  It all depends on the cost and how the others feel about it.

 

How did you find deals like those ?

[Guest deepValue]

Please let us know before the pump begins.

 

This is a family holding company which 95 percent of the assets are real estate/undeveloped land. If the cost makes sense i think floating 10 percent to the public might be worth it to build a public track record and maybe obtain financing easier.  Anyway i'm thinking out loud.  It all depends on the cost and how the others feel about it.

 

I was only kidding.

 

Doing a reverse merger doesn't really make sense to me, though. You'd have to pay a not-insignificant portion of your annual cash flow for upfront merger costs, then you'd have to essentially give away 10% of the company just to be "public," then you'd have to go to a bank to sell a secondary offering. Seems like you could just skip to the end and either get a local businessman to invest in the equity or keep shopping for bank loans.

 

If you want a verifiable record, just have an auditor verify your books each quarter.

[oddballstocks]

Buy a shell for $10-15k from a broker and do a reverse merger.  If you want to be OTC listed accounting costs would be no different than what you're already paying your accountant.

 

Shell will cost you a lot more than that.  You also have to be careful what type of shell you buy, because there is still legacy liability risk depending on the type of business that operated under the shell previously.  Cheers!

 

My quote is from a few years ago, I have no idea on current prices.  Your main point about past risk is great, I think that's the biggest risk in this.  You don't want to buy a tainted shell.

[oddballstocks]

Why on earth would you want to go public? So many of these legitimate microcap companies want to go private.

 

You could list fee shares on Crypto:Stocks and deal only in BTC. That's the absolutely cheapest route. Just need an email address :P

 

Hey TTD,

 

I was just curious about the idea. Its something i pitched to the members. I'm thinking building a public track record and maybe getting financing easier could be a positive.  We got turned down for financing on a property where we had 30 percent down. It was distressed and 50 percent of the revenue was for staff payroll! Instead of 21 employees we figured the property only needed between 10-12 people. This reduction would have made the property cash flow positive.  The bank didnt accept that rationale.

 

Please let us know before the pump begins.

 

This is a family holding company which 95 percent of the assets are real estate/undeveloped land. If the cost makes sense i think floating 10 percent to the public might be worth it to build a public track record and maybe obtain financing easier.  Anyway i'm thinking out loud.  It all depends on the cost and how the others feel about it.

 

Also, why not just list on OTCMarkets?  I'm pretty sure the reporting requirements aren't very stringent, and if you don't have 1500 shareholders you don't need to register with the SEC.  This seems like the best course of action, just call up OTCMarkets and ask about getting listed.  I think there's a fee to acquire a ticker, and then you can file quarterly or annually on the site depending on what you want.

 

The hardest part is to get brokers and market makers to trade your stock.  If you can get two market makers to trade you then they will list you I believe.  You'd need to let 10% of the company go and get some trading going.  I think some small market makers will also handle closely held offerings too.

[premfan]

How did you find deals like those ?

 

I have been focusing on the hotel industry recently. I contacted hotel brokers got there listings and worked from there. The key is to find a hotel that shows consistent revenue but, horrible management of operating expense.  Can i come in with a lower operating expense structure? How much is my mortgage compared to the current owner? Cut out anything that is not needed to run a hotel while not affecting income. 

 

The holy grail of hotels is finding a independant brand turn it to a brand hotel. This will increase revenue overnight cause now you are in there hotel reservation system.

 

I finally spoke to a younger indian hotel owner. He explained me there family's blueprint. 

 

1.) Buy lower economy brand hotel.

2.) Fire all employees and bring in there family members from india that want to work in the U.S.

3.) Cut out all extra operating expenses. No bars/restaurants or anything. Just rooms thats it.

4.) 2-5 years sell hotel and do it again. They dont pay capital gains tax due to i believe the 1031 form.

 

One last note his family buys a lower economy brand cause the pip ( property important plan) is almost non-existent.

[tiddman]

Back in 2006 I approached a shell company to see about a reverse-merger-IPO and the numbers that were bandied about were in the $200-400k range.  Some of this could have been in the form of stock in the new company.  Maintaining a public company is expensive, moreso after Sarbanes-Oxley.  Just to Google a quick data point:

 

http://www.icba.org/files/ICBASites/PDFs/cl120610.pdf

 

ICBA’s 2005 survey of Section 404 costs for community banks revealed that the average community bank spends $200,000 and devotes over 2,000 internal staff hours to comply with Section 404.

 

This is only a single data point and geared towards community banks (which have other regulations/compliance) but I think you can expect well into six figures for the initial and ongoing expense.  It might be possible to defray some of this if you are an avid DIY'er or have a lawyer or accountant in the family or something but I would definitely do some homework on this.

 

If the goal is to have some kind of family trust with multiple members and the ability to buy and sell shares and that kind of thing, this can all be done privately, essentially a private equity fund.  Usually the regulations for this as much decreased if everyone involved is an accredited investor, if not then the regulations can get pretty onerous.

[Morgan]

I was just curious about the idea. Its something i pitched to the members. I'm thinking building a public track record and maybe getting financing easier could be a positive.  We got turned down for financing on a property where we had 30 percent down. It was distressed and 50 percent of the revenue was for staff payroll! Instead of 21 employees we figured the property only needed between 10-12 people. This reduction would have made the property cash flow positive.  The bank didnt accept that rationale.

I have a friend in Boston who is in the real estate business. When he was younger, looking for one of his first loans, he said he was turned down by 91 banks (very likely an exaggeration) but the moral is he kept looking and looking and looking and eventually someone lent him the money. If you have been turned down by one bank I would suggest going to many, many more until you get the funding. Surely there is some banker out there who can see your vision and rationale that will fund you. If you're succesful you could have, say, 10-20 hotels in the next ten years. It's good business for him to successfully lend you a ton of money. It will make him look good, so go find that guy (or gal). ;D

 

How did you find deals like those ?

 

I have been focusing on the hotel industry recently. I contacted hotel brokers got there listings and worked from there. The key is to find a hotel that shows consistent revenue but, horrible management of operating expense.  Can i come in with a lower operating expense structure? How much is my mortgage compared to the current owner? Cut out anything that is not needed to run a hotel while not affecting income. 

 

The holy grail of hotels is finding a independant brand turn it to a brand hotel. This will increase revenue overnight cause now you are in there hotel reservation system.

 

I finally spoke to a younger indian hotel owner. He explained me there family's blueprint. 

 

1.) Buy lower economy brand hotel.

2.) Fire all employees and bring in there family members from india that want to work in the U.S.

3.) Cut out all extra operating expenses. No bars/restaurants or anything. Just rooms thats it.

4.) 2-5 years sell hotel and do it again. They dont pay capital gains tax due to i believe the 1031 form.

 

One last note his family buys a lower economy brand cause the pip ( property important plan) is almost non-existent.

Thank you for that rundown. Very cool to see the angle at which people are succesfully getting into various businesses!

[Hielko]

The question is if this is really about becoming a public company, or if remaining private but having tradeable shares on the pink sheets is also an acceptable outcome. In that case you don't have all those expensive regulatory requirements.