| |
| |
|
Small Business Information |
|
|
|
Why are Reverse Mergers Often the Victims of Short Sellers?
There is a great deal of abuse going on in the OTC Bulletin Board Market and a lot of money is being made as result of it. Regulators are trying to deal with the problem but are unable to put a halt to it, unless they take drastic steps which will be detrimental to the small and micro-cap market. The small and micro-cap market is an essential part in bringing small and mid-size companies public through Reverse merger and Regulation D (504) offering, these are the two most popular methods used by small and mid-size companies to go public. This two avenues are prefer by small and mid size companies because they simpler and less expensive than the traditional IPO, It can be refer to as a simplified fast track method by which a private company can become a public company. I described the process in detail how small and mid-size companies can go public in previous articles, if you miss them, you can email me and I will be happy to explain it. I have over 25 years of experience in the securities industry as market maker and trader. In my own brokerage firm and with a couple of the largest wholesalers in Wall Street. I believe my experience qualify me to write on the subject with clarity and honesty from a birds eye view. I believe in short selling as a legitimate way of providing liquidity to the market as an essential part market making, that is not what I am referring to. A short position is established when somebody sells a stock they do not own hoping to be able to buy it bac at a later day for a lower price. There are several reasons why selling short the stock of companies that have gone public through a reverse merger is profitable and easy, I will identify them and suggest ways that this can be stopped once all for all without affecting the legitimate short seller who are willing to sell and bear the risks associated with carrying a short position. Reason number one (1). Corporate shells, in order for an operating private company to go public in a Reverse merger it must merger with a public shell. A public shell is what remains when a public company is bankrupt or liquidated, also some shell are created as Blank Check companies, A Blank Check company has shareholder and maybe some cash in its books but nothing else, they are created by enterprising entrepreneurs for the sole purpose of merging an operating private company into it. What happens is that when the shell owner sell the shell to the private company he retains 5-15% of the shares for himself, on top of collecting any where upward of $500,000.00 for himself. And even if he signed and agreement not to sell for a year, most of these people can not be trusted and will at some point dump the stock or have somebody create a short position in their behalf. Solution: The shell owner must be made to sell the entire position and be content with the money, which in most cases represents an enormous profit. I don't have anything against anybody making a lot of money, I am all for it because I also stand to make a lot of money, I am against the way they do it. (2). The shareholder base: In order for a company be listed on the NASDAQ Small-Cap market or the OTC Bulletin Board it must have a specified number of shareholders to qualify for listing. (2A). Improper due diligence: Prior to purchasing a shell the private company along with the consultant that they retain to assist them in the Reverse merger should do a complete review of the shareholder list. some of those shareholder may have excessive number of shares and the true beneficial owner may be the shell owner or the consultant himself, there are a lot of smooth talking wolves posing as consultant who are operating in conjunction with the shell owner. Solution: First run the consultant's named and his previous employer through google and see if he has been convicted of any securities related crimes and has been barred from participating in any stock related transactions. Second write the regulator and request that consultants be required to have a website with their name on it, most of this unscrupulous character operate in a stealth manner so that regulators can't detect their activities. Petition the Securities and Exchange commission requesting a reduction in the number of shareholders require for listing, and if a shell has too many shares outstanding don't buy it! (3), Market Makers: Market makers in OTC Bulletin Board Securities are permitted to maintain a short position in securities that they are acting as market makers, but what some trader do is they register for a stock and go out sell stock on the bid (the price other market makers are willing to pay) and immediately cease to make a market in the stock and keep the short position. Technically when a trader does this, he is circumventing the intent of the rule which allows market makers to short a stock in his role as a market maker. Solution: Require traders to remain acting as market makers until they purchase the stock back, also regulators must make clearing agent to enforce the rules concerning the delivery of the securities on settlement or execute a buy in (buy the stock back and charge the seller) if the seller fails to deliver the stock within the prescribed period of time. I believe that these reforms will go a long way in altering the climate for participant in Reverse merger, and in removing the vultures the prey on unsophisticated business owner from the market place. But until the regulators act the responsibility is on the business owner to perform the proper research, if I sound like a crusader maybe that is because the industry has been good to me and I hate to see the vultures taking it over. Joseph D. Quinones, President of Genesis Corporate Advisors has spent over 25 years in the securities industry. In 1992 he founded JDQ Financial Group, Inc. and proceeded to build it up from a one man operation to the point where it employed many traders, advised numerous client and generate millions in revenues. If you are thinking about doing a reverse merger and have questions contact us at: www.genesiscorporateadvisors.com Email: josephquinones@genesiscorporateadvisors.com
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Small Business Success - It's a Matter of Confidence I was floored! I couldn't believe what they were saying! But there they sat -- three of the biggest film stars of our age -- telling the world they had issues with confidence. I was watching an interview where Meryl Streep, Nicole Kidman and Julianne Moore were talking with Oprah Winfrey. Knowledge is Power Why does research and education play an important part of the business relationship?Have you ever attended a business briefing or meeting without reading the materials ahead of time? I know I certainly have, and I also know that I felt like a fool when asked a question. It was up to me to be informed about the meeting and to read the information, and I neglected to do so. Top 10 Mistakes to Avoid When Joining a Professional Association I'll be the first to admit that I went a little nuts when I moved I moved recently in terms of going all-out to participate in a variety of professional associations. I had some experience with most of the groups that I visited in other places I had lived, or had clients who had positive experiences with certain groups. Mobile Detailing Environmental Concern in the Deep South Macon, GA goes after garage-gas station conversion detail/hand car washes for allowing storm drain pollution. I can remember a time when we were in the Macon GA. FTC Franchise Rule if Enacted will Trigger Hardship for Private Sector The FTC Franchise Rule maybe changed, as the Federal trade Commission has put out a report to the franchising industry as to upgrade the rule. If enacted will it will trigger hardship for private sector and cost many trees their lives; Paperwork. Reaping the Rewards of Cost Cutting In these days of insecurity and uncertain futures, the tendency is to manage for survival but the smart business leaders are actively hunting for profits.And they are doing this without launching costly new initiatives or major capital investments. Small Business Survival Tips No matter what kind of small business you have, you need read these "small business survival tips" which will help you to succeed. You may be in Internet business, traditional business, or you may be a local merchant with 150 employees; whichever, however or whatever--you've got to know how to keep your business alive during economic recessions. Do You Need Accounting Software for Your Small Business? If you're anything like me then you dislike with a vengeance doing your accounts and taxes.So how can you make this process easier, less painful and cut your accountancy fees?Well buying an accounting software package is one way. Why The Carwash Industry is Stagnant; What You Can Do to Change Your Field Many years ago, I had warned the carwash industry of problems brewing in customer dissatisfaction as we continued to grow our car wash company into a National Franchise Chain. I warned of environmental controls, speed of wash, water usage, quality of labor, price points, car wash fundraisers, car damage, up selling and hot wax. How to Start a Carpet Cleaning Company Opening a carpet cleaning business is a great way to earn money as your own boss. This is a relatively simple business to start, with low overhead, and little experience required. Common Sources of Financing for Small Business The choice of financing is an important determinant of whether a product reaches the market, or whether an existing business can survive. The choice of financing is an important part of being an entrepreneur and business owner, and the ability to raise cash when you have no or limited history takes skill and creativity. Success Tips for Small Business Owners Running a small business requires many skills. However, to do this successfully you need to organize yourself first. The Most Important Decision of Your Massage Business Career Don't you find that there are so many decisions you need to make each and every day regarding the direction of your massage practice. Especially if you are a solo-preneur or own your own massage business. Retail Customer Opportunities for Pressure Washing Companies Pressure washing companies must look for customers in the retail industry to make sure they stay busy. Large Box Stores and Grocery Stores are often you best customers in that regard. Small Businesses With Work Trucks; A Warning If you are a non-operator owner of many work trucks, you should keep your business credit card with you not leave it in one of the trucks. You should not issue them to employees without strict guidlines. Cash Flow: Why Chaos Equals Poor Cash Flow Recently one of my customers told me the chaos swirling through his company was the result of poor cash flow. If only he had more money, his company would run better. Your Ideal Client - A Key Concept for Solo and Small Business Marketing "I don't know the key to success, but the key to failure is trying to please everybody."--Bill CosbyHave you ever had clients that were more trouble than they were worth? Maybe they were always late to pay, or didn't do what they said they'd do. Your Practice is Only as Valuable as Your Referral Base Many physical therapists in private practice have the appearance of a very successful business that is built on the backs of about four to five doctors. Now if anything would happen to any of these guys, the value of these practices would drop markedly. Asking the RIGHT Questions Which questions do you need to ask to even get a hint if you really want to know something about another person's business pain?We define business pain as a problem that a business needs to have a solution for. The pain may be that they do not have enough sales, or they do not have an appropriate process in order to track their forecasting. More Business Card Marketing If you are worried about how many different business cards you should carry, let me speak from experience, you need only ONE!The best way to confuse a potential customer is to present them with more than one business card. You may be doing a number of things and have cards for each one (even have several businesses where you do work) but you need to focus on what it is that you do best.
|
| home | site map | Web directory | Pham Thanh Long | Luat su| Lawyer| Links |
| © 2006 |
