|
Click Here
for more Articles
|
|
|
|
Alternative
Venture Finance - Shell Corporations
|
|
by:
Dave Lavinsky
|
A shell corporation is a company that is
incorporated but has no significant assets or operations. These
corporations may be formed as an alternative venture financing
mechanism.
Shell company financing works in two ways. In many cases, the shell
corporation is created from scratch. The purpose of these shells is to
raise money and to get a number of shares outstanding into the public’s
hands. In most cases, the shares are sold in units. That is, the shares
are sold as one share of common stuck plus warrants at the current
offering price.
The “empty” shell is then merged with the operating company. The merged
companies begin to report operating results and when the results are
good, existing stockholders exercise their warrants and provide needed
capital into the company.
A second type of shell corporation is formed when the company seeking
capital identifies an existing shell or inactive public company (IPC)
as a candidate for a reverse acquisition. This typically occurs after a
public company emerges from bankruptcy. At this time it may be void of
assets other than cash. In fact, the principal asset of the IPC is its
often its public registration and a roster of shareholders from which
new capital may be raised.
Shell corporations are a quick and cost effective way of taking a
company public and raising public capital. However, typically bridge
capital is required to finance the process and take the company to a
point where investors are interested in exercising their options.
About the author:
GT Business
Plans has developed over 200 business plans for clients that
have collectively raised over $750 million in financing, launched
numerous new product and service lines and gained competitive advantage
and market share. GT Business Plans is the sister site of GT Venture Capital
Circulated by Article Emporium
|
|
