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 http://www.article-emporium.com
<
< Previous article |
Next article >
Related sites on Business plan:
|
>> An Exporter? Who, Me?
>> Angel Investors: Who They Are & When Are They Appropriate
>> Are You Satisfied With Your Business Just As It Is?
>> Checklist for starting a business
>> Do You Love Food? - Then Maybe Opening a Restaurant is Not Such a Crazy Idea
>> Do You Need Credit Card Processing Services?
>> E-books in your life
>> Finance Your Small Business: So Much Money ? So Little Time
>> Finding a Venture Capital Firm
>> First Steps to Starting Your Own Small Business
>> Franchise Opportunities Are Not Always As Good As They Sound
>> HOW TO STAY FOCUSSED AND BUILD YOUR BUSINESS
>> Identifying the Right Venture Capital Firm Partner
>> Inventor Help: Go Hire a Great Patent Lawyer
>> Is Your Home Business Prepared for a Disaster?
>> Issuing Warrants to Investors
>> Make Money On A Home Based Business
>> Making A Living Online
>> Need an Idea for a New Business - Hair & Beauty Salons are Booming Nationwide! Why? Because the Baby Boomers are Demanding These Personal Care Services.
>> One of The Best New Business Opportunities May Be Right there in Your Home - a New Daycare Business.
|
