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When companies contact us about going public they will typically start out by saying something like, “I’ve been watching your videos and have been following your company in the media for a while now” or “I’ve been reading your articles about globalization and going public over the past few months and…”. My point in stating the above is this, I’ve never had a company that calls and says, “We were going to get a corporate line of credit but figured we’d go public instead”. Companies that are going about this the right way will have spent time preparing their company to go public and they’ve taken the appropriate initiatives to set up post public finance options, investor relations and other efforts that are conducive to their company performing in the aftermarket.
As an IPO consultant it’s not my job to sell the company on why they should go public. It’s my job to question their motivations and play devil’s advocate to try to test their theories and inject factual information that will either make them more confident with their decision or talk them out of taking this path. Proceed with caution. If you get an IPO facilitation firm on the phone and they are absolutely in love with your company, idea and plans from the onset of the conversation, chances are you’re going to regret it in the end as this consultant has too much time on their hands and sees an easy ‘fee oriented’ target.
Going public is a mutual effort and can only work if both sides are going to make out financially in the end, not upfront. Consultants that charge front heavy fees are typically not going to be around in a stabilization or advisory capacity once you are public which means you’ll almost certainly fail to raise the public capital you’re seeking. Instead, find a consultant that levels out their fee structure with a general retainer fee and most of the compensation on the back end. Retainer fees of $40k to $50k are common among established and legitimate consulting firms. You’ll also have the PCAOB audit which will range from $10k to $30k and the S1 filing and comments fees for legal should be tied into the back end with some general expense compensation during the process. Your market maker attachment and 15c211 filing should also be included in back end equity by the consultant.
As far as equity compensation keep in mind that if a consulting firm wants to take all upfront fees and makes no mention of the post public equity distribution then they are taking you on as a client for the wrong reasons. If they believe in your concept and truly want to get involved to assist you in a well rounded, strategic offering they will insist on an equity stake of 5% to 20% depending on how much pre public structuring and strategies as well as post public work must be done.
In going public your company can become a globalized, stable industry powerhouse but attaching yourself to the wrong facilitator upfront can damn your efforts before they begin. Find a well published, full service consulting firm that will take control of the situation so you can focus on your business and not have to worry about the intricacies that can destroy your offering potential.
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For investors, that once in a life time opportunity is always out there happening for someone else. There is always a story about a guy that got in on an IPO for a software company that turned him into an overnight millionaire or that next big bio-tech IPO for a company that has the closest thing to a cure for Alzheimer’s that the industry has ever seen, they did a small pre IPO raise and then closed out the offering and now there are talks of a buyout, again overnight millionaires will be made.
Are these investors exceptional in terms of their research capabilities and knee deep in investment banking contacts that give them insider info on the down low? Most likely they did two simple things the right way. First, they made themselves available for opportunity by subscribing to IPO alerts from reputable firms. If you’re quick to action you could find yourself in the middle of an obscenely profitable venture. Second it’s the luck of the draw for those who are willing to put themselves out there for a little acceptable risk for the chance of big reward. Obviously blatant risks like Forex, pink sheet pump and dumps and investing in pie in the sky concepts that don’t have a chance in heck of actually working are for the few adrenalin junky millionaires who thrive off of the rush of, um well, losing.
If, hypothetically you get access to a possible jackpot IPO in the rare ‘Pre IPO’ stage what is your next move? Who do you call to help you with research and how do you evaluate the company on the spot based off of the prototypical PPM? First, if it’s your money it’s fine to get a second opinion but you need to know what to look for in a viable investment.
Here is how you do a spot audit for stability in an investment in the Pre IPO phase: 1. Look for a solid corporate structure consisting of well pedigreed professionals in the C-level positions, strong and diversified inter-industry board of directors, secondary advisory board, strategic alliances and an equity/share distribution mechanism that is organized and compliant and a share price based off of a solid valuation by a reputable firm.
2. Are they in a growth industry? When you look at the founders resume in the business plan are they serial entrepreneurs with a track record of modest success but minimal focus? Or has their career been targeted and focused on one single direction? You want to professional that has worked his entire life honing his skills and pedigree for this particular industry and this on opportunity and he’s all in and there is minimal possibility of pump and dump.
3. What is their 12 month strategy post public? What is their growth strategy? If they think they can grow organically they’re in for a shocker. They have to show a plan for post public growth through acquisition and subsidiary merger. What targets do they have lined up and what will they bring to the company which will ultimately affect your share price and overall investment. Who does their legal? What is their post public market creation strategy and who is their contracted investor relations firm and what is their track record for dealing with companies in this particular industry genre? What is their globalization strategy for rapid and expedient but controlled growth?
4. Are they politically connected? What strategies firm are they working with to gain global and incremental political and legislative support? What bills are they mentioned in and who are the politicians that are sponsoring and cosponsoring this legislation and what type of photo opps and press is being set up to make this company the face to the industry?
Never invest with borrowed funds or capital that you depend on for retirement or necessity. Only invest with capital you’re not afraid to lose (this goes for any and all investments). Getting involved in pre IPO opportunities can be very rewarding for the informed, accredited investor. Do your research and make yourself available to the right circles of influence that can act as hotbeds for opportunity. Surround yourself with industry insiders and ask lots of questions.
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In a perfect world public and large private companies could experience rapid growth by simply treating their client base right and taking and gradually making more transactions to increase revenues to subsidize the additional costs of more locations, employees etc. This is fine if you’re only trying to build a company worth a few million and then fold up when you’re ready to retire.
But if you are looking to build a legacy company that you can hand down to generations, create jobs, expand globally and constantly have a steady stream of purchase and merger offers as a safety net, you need to grow through acquisition and the best way to raise the capital for this process is to go public.
Going public is a technical process where the post public promotion referred to as IR or Investor Relations is the key to stabilizing and growing your share price. Limit the volume of shares for public consumption, pump out maximum publicity, make brokers and investors comb the planet to find available shares and force the price to grow by leaps and bounds by creating demand.
Marine Electronics By Garmin is another great article.
When you need funding use PIPES and pay off the loan so the PIPE firm doesn’t liquidate the shares onto the market, get those shares back. I had a client email me a letter he got from a Do It Yourself investor relations firm. They claim to be able to train CEOs of public companies to take care of the IR campaigns for companies on the London, OTCBB and Pink Sheets. The claim that they can teach you to never need the services of an IR firm again and my response to this client was….Um…Are you an idiot? I guess I was a little upset since I own five percent of the company that he was proposing this DIY solution for IR.
Here is the deal. You need to three basic things to have a solid investor relations campaign. First you need a Pump solution. Don’t confuse pump with pump and dump. Remember, you always want to limit the shares put out to the public but you need to pump public demand and hunger for your shares to keep the price where it’s high enough to use as collateral for loans to subsidize growth without having to release more shares onto the market.
Next you need volume. Keep the shares that are in the market place moving. Hold corporate shares to your chest and keep the shares in the public moving, without volume you won’t be able to do anything with your stock. Don’t mistake the concept of creating volume with releasing shares into the public to create cash. Last but not least you need to be in the public eye. You need to have a publicist that will get you on industry expert panels on radio, tv, blogs, podcasts and every publicity medium in between. Get your CEOs face, company name and trading symbol on the bottom corner of everything including but not limited to the bicep and forearm of every sales executive in the company. Ok maybe that’s a bit much but my point is an organization that stands together behind their CEO is an organization that will survive and thrive.
These were just a few of the points that one needs to consider when going public, trying to stay public and promoting a public company. In this industry the old conviction of . . . Believe none of what you hear and half of what you see is the golden rule.
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One of the most profitable investment solutions for an accredited investor is the almighty Pre IPO, seed capital opportunity. Though extremely profitable this transaction is not for the non accredited or amateur investor. The risks are numerous such as how long it will take the company to achieve it’s symbol, post public market creation and investor relations, corporate publicity, SEC audit and the ‘C’ level executives’ professional pedigree just to name a few.
But when one takes all of this into consideration it is ideal to team up with a brokerage or consulting firm who specializes in the task of corporate strategies and IPOs. When a motivated and seasoned investor aligns himself/herself with a solid firm with who has access to IPO’s it can be an extremely profitable venture and one of the few win/win situations in the investment industry.
Having access to a steady stream of Pre IPOs allows an investor to diversify in highly sought after and deeply discounted seed stock and also creates a rewarding solution for the IPO facilitators as they are raising capital and qualifying the company for it’s offering.
There are a few things that an investor should consider when seeking a strategic alliance with an IPO facilitator: how long on average does it take the firm to complete a transaction from S1 to Symbol? What does the post public Investor Relations strategy look like to create the market? Do they have a market maker or broker dealer ready to sponsor the stock? What does the client company’s executive staff, business model, board of directors and strategic partnerships look like? And who is doing the pre IPO audit on the client company?
These are just a few things to consider when finding stepping out to get involved with the much sought after pre IPO investment market.
The author of this article is not a broker dealer or licensed securities agent and one should always seek the consultation of a licensed agent before getting involved with an investment of any kind. This article is for information purposes only.
Expand Your Company To China Free Info Video, call Princeton Corporate Solutions at 267-233-0183 Globalize Your Company Now We will help you get where you want to go!