RE: Wise than Wishbone Gold29 Jan 2023 14:33
‘ Funds at this initial pre-admission stage are raised from outsiders via an IPO process. It is nice to raise a large amount, but not absolutely necessary, the main objective is to get the company listed and trading (on the Stock Exchange that is). Quite often, the shares just go to a discount, due to some insider being able to sell from the off. The main thing is that they have got a vehicle and whoever actually controls it then can do whatever they want with the company.
If the deal does not work from the perspective of obtaining investor interest in the project, then the company can simply change direction, which also provides the opportunity to remove any individuals who may have become troublesome and are not “on the same page” as those in charge who are focussed on getting the short-term cash. This can easily be done: remember the objective of the professional operator right from the outset is to control the board, so they can then do whatever they want.
The hard work is preparing and clearing the initial admission document/prospectus and that is what most of the upfront money for the professional advisers is for. Thereafter, if the company changes direction gradually, it can hope to avoid the need for another admission document or prospectus, which can also entail a lengthy trading suspension, from which some companies never return.
Future financing will be done as previously described, but those directors who feel uncomfortable about what is often entailed and who also do not care about the share price, can simply turn to a convertible loan provider, who will do the work for them. The logical extension would be for the company just to sell its own shares directly into the market, but that has to be done via a legally tight investor sharing agreement or equity sharing facility. At that point though, the situation would be so far gone that it is really just the end game, with the directors trying to get whatever cash they can, before a boardroom change will be necessary and a substantial share consolidation.’
Just info.
Usual caveats
Trek
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