Investment & Financial Articles
Title: Non-Reporting Shells
Author: William Cate
Article:
Non-Reporting Shells By William Cate Published January 1999
[http://home.earthlink.net/~beowulfinvestments/]
[http://home.earthlink.net/~beowulfinvestments/globalvillageinves
tmentclubwelcome/]
Clean shells don't exist. Among the dirtiest of dirty shells are
non-reporting shells. A shell is a company that's trading but
lacks assets. Usually, the private company buys the shell and
puts their business into it. It rarely works out well for the
private company.
As I read Section 5 of the 1933 U. S. Securities Act, the only
American stock that should be publicly traded are the shares of
companies reporting to the U. S. Securities and Exchange
Commission (SEC). The National Association of Securities Dealers
(NASD) didn't share my view of the need to be a "reporting"
company to trade on the Over-the-Counter Bulletin Board (OTCBB).
In 1998, they changed their minds. In January 1999, the NASD
announced that they would be delisting about 3,400 OTCBB
companies that weren't "reporting" to the SEC. The delisting
will start in July 1999. The companies will be delisted by
trading symbol starting with AA. The last of the companies will
be delisted in 2000.
The NASD advises that "non-reporting" companies can become
reporting companies by filing a Form 10SB with the SEC. It will
cost the non-reporting company over $100,000. I suspect that few
non-reporting applicants will get their "Effective" letters
before they are delisted.
Applying the axiom that "There's a sucker born every minute," an
industry developed to sell these worthless shells to
unsuspecting private companies. You can own your worthless
non-reporting shell for only US$150,000.
I interviewed one shell seller for a client. To my comment that
the shell company was facing delisting in August, his reply was,
"
but there is so much more you can do with a company about to be
delisted."
My reply was "what more can I do with a company that's about to
be delisted? There was a pause and then a click.
If you buy a non-reporting shell, you deserve the failure that
will certainly follow. There are a few things that can be done
with non-reporting shells. But these are options for market
professionals, not entrepreneurs building real companies.
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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