Investment & Financial Articles
Title: Spinoffs
Author: William Cate
Article:
Spinoffs By William Cate Published August 1999
[http://home.earthlink.net/~beowulfinvestments/]
[http://home.earthlink.net/~beowulfinvestments/globalvillageinves
tmentclubwelcome/]
Doing a spinoff is ten times better than buying a shell. Your
spinoff will be clean. You'll retain a higher percentage of your
stock. It costs you less. If you doubt me, send me a
self-addressed stamped envelope and I'll send you my spinoff
articles from "Time" and "American Venture."
I work with two public companies willing to spinoff private
companies. 1. Company A will spinoff almost any sound company
with competent and honest management. They'll consider a
well-designed startup. They are my default solution for private
companies seeking to buy a shell. The cost is $25,000 less the
payment by the public company for your stock. You should add
legal and accounting costs. I would recommend this company's
auditors who usually charge less than $20,000 for their audit. I
would recommend my California Securities Attorney who will want
a $25,000 retainer against a $75,000 flat fee. This will bring
your total costs to under $115,000. You'll be responsible for
stock support and finding your Private Placement financing.
2. Company B is selective. They require that the company have at
least two million dollar gross revenues with at least five
hundred thousand reinvested pretax profit. The company must have
an international market for their product or service. They
arrange up to a $10.4 million Offshore Private Placement
financing for their clients. They'll pay your legal costs and
your brokerage costs for the Private Placement. They'll supply
supplemental funds for your Stock Support Program. They want to
be involved with your company for at least five years. They'll
want a seat on your Board of Directors. You must be willing to
pool and vault the insider stock for five years. They charge
$225,000 with a $60,000 retainer and 100,000 shares of your
stock. It's a cost effective turnkey service for companies that
meet their requirements.
Doing a spinoff allows your insiders to retain 90% of the
issued shares of your company. If you accept the Company B
Offshore Private Placement financing, you'll still have over 56%
control of your company. Compare that to the usual 60% control
you get with a shell, WITHOUT A FINANCING.
Compare costs with buying a shell. The shell will cost you
$150,000. You must add the costs of an audit, cleanup costs and
legal costs. If you arrange a financing, you must add the
underwriter's cost to the cost of buying your shell. Which makes
more sense? Pay $25,000 or pay $150,000.
To contact the author: Visit the Beowulf Investments website:
[http://home.earthlink.net/~beowulfinvestments/] Or, visit the
Global Village Investment Club Website:
[http://home.earthlink.net/~beowulfinvestments/globalvillageinves
tmentclubwelcome/]
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/]
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