“A blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person…..Because of the nature of blank check companies, the SEC does not allow them to use some of the exemptions from the registration requirements when selling their securities.”

The rules (Rule 419) permit a company to file a registration statement and ultimately be traded on certain stock exchanges if there is full disclosure of the business plan, if all funds raised are placed into an escrow account and if certain shares remain restricted subject to more onerous conditions that do not apply to regular operating businesses. There are other differences as well.

While the Securities and Exchange Commission has a path to follow and obtain an effective registration statement, the stock exchanges each have their own requirements to list a company for trading. Generally, they are seeking companies that have raised enough investment capital to implement and succeed with their stated plan.

——————

For more information about conducting a direct public offering for a blank check company,
contact Public Financial Services.

1. There is no minimum amount of sales or profit to qualify to become publicly traded in the United States.

2. We do not recommend a reverse merger if it can be avoided. A direct public offering is less expensive and perfectly safe. However, it does take longer to complete a direct public offering than a reverse merger, so if you are in a rush then you might need to consider going public by reverse merger.

3. We can help large companies find an investment banking firm who might be interested in completing a traditional initial public offering. However, if the large underwriters refuse, we can still help even large companies go public in a self underwritten offering.

4. The costs to go public vary based on the method of going public. An IPO can cost well more than $1 million. A reverse merger generally costs more than $500,000 when including the cost of the shell, equity, lawyers, accountants, etc. A direct public offering generally costs between $60,000 to $200,000, depending on the size and complexity of the company. Accounting fees tend to be the largest variable in total cost.

5. There are different benefits of going public for companies that (a) are growing rapidly, (b) stable but profitable or (c) early-stage or start-up. Think of being publicly traded as a tool that can be used as part of your corporate strategy. Financing is generally faster, easier and less expensive; acquisitions are generally faster, easier and involve less dilution; attracting and retaining employees is easier when offering stock options; shareholder liquidity is better when you are quoted. Consider all the advantages and disadvantages.

6. Our fees completely vary with the size, scope and complexity of the transaction. Generally, we charge cash fees starting at $40,000 and share/warrants based on a number of variables. Third party fees such as those for lawyers and accountants are additional expenses.

7. We are interested in working with consultants who can introduce us to private companies in China (and elsewhere) and we offer a generous referral fee.

If you have any additional question, feel free to contact Public Financial Services, LLC by phone or email.