Venture Capital Profits
Venture Capital Profits By William Cate
The Perfect World
In a perfect world, stocks markets would create jobs, produce higher standards of living for the community and ensure greater investor profits. We don't live in a perfect world. The principal function of stock markets in our real world is to redistribute the wealth from the many to the few.
The Players
There are three primary groups in every stock market. The investors, who supply the money and, in most cases, lose their risk capital. They are the many. There are the public company executives, most of whom are stock promoters. They supply the reason for the investors to lose their money. And there are the stockbrokers, who sell the investors on the reasons to lose their money. The promoters and stockbrokers are the few. It's not that every public company executive is a swindler. Nor are all stockbrokers charlatans. But, the crooks are in control of most stock markets.
The Regulator's Real Job
The job of the securities regulators is to throw sufficient public company executives to the lions to ensure that the investors continue to lose their money. A few stockbrokers, who are too blatant about fleecing the public, are removed from the game by either the regulators or the stockbrokers association. When the regulators fail to feed the lions, the investors lose faith in the stock market and it disappears.
Two Hundred US Stock Markets
We've had over 200 U.S. stock markets. Less than 3% trade today. Canada changes stock markets as often as Imelda Marcos changed shoes. The nonexistent stock issues raised by Stockgate are valid. I've objected to stockbrokers and market professionals selling nonexistent stock for 20 years. But, the stiffing of the public game goes on.
The Next Lion Feeding
On July 19, 2005, the U.S. Securities and Exchange Commission (SEC) finalized two new rules. These Rules are 33-8587 and 34-52038. They throw the firms doing reverse mergers, or selling shells, to the lions. Companies going public via reverse mergers were almost certain losers for investors. The investor relations costs of finding buyers for the past shell owners' shares and then finding buyers every quarter for those shares in the float was a cost that few public companies could sustain. The public company failed and the public was fleeced. As often happens, the SEC had to feed the lions to keep the public in the stock game.
In the US, the popularity of reverse mergers grew over the past two decades, because the costs of filing a SB2 registration has swelled to between $1,500,000 to $2,230,000 with about even odds of trading and a wait of over one year. The SEC's decision to close the trading shell backdoor hasn't eliminated all the backdoors around the SEC's registration process.
The VCP Strategy - A Better Way
One workable alternative to being public, without going broke in the process, is the Venture Capital Profits (VCP) strategy. It offers solutions to many of the core problems faced by public companies in the United States. However, some of those solutions have made it less than attractive to the majority of CFOs seeking to be public. For instance, if the private company's primary reason for going public is to provide a liquidity event for their insiders, officers and directors, VCP isn't the answer. VCP argues that the only way to ensure the success of a public company is to require that none of the insiders, officers or directors sell any of their shares until the public company reaches its exit strategy. This isn't the easily circumvented Rule 144 that requires a one-year hold on insider shares. It's a requirement to pool and vault insider shares for five to seven years. Few private companies seeking to go public in the States are likely to agree to the end of insider dumping on the unsuspecting American public. After all, that has been the primary reason private companies go public in America.
The VCP Benefits
There are benefits to the public company client in the VCP vision. The public company avoids the massive investor relations' costs of finding public buyers for nonexistent shares. The company has access, in the same way as CISCO Systems did, to unlimited amounts of corporate cash for the acquisition of cash-producing assets. There is venture capital money to prime the public company's acquisition down the road to having a hundred-million-dollar balance sheet. That, in my opinion, is a better way.
If you are a CFO seeking a cost effective, better solution to the American going public process, you should consider visiting: [http://home.earthlink.net/~beowulfinvestments/]
If you want to understand the VCP vision, consider ordering and reading the ebook. You may be among the 2% who want to build a company rather than bilk the public.
You can contact William Cate at: Beowulfinvestments@Earthlink.net
About the author: He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinves tmentclubwelcome/]
