IPO PIPEs

BY William Cate

IPO PIPEs
By
William Cate

An Initial Public Offering (IPO) is like a Keystone Cops fire drill. Everyone goes off in a different direction and in 85%25 of the cases on the Over-the-Counter Bulletin Board (OTCBB), the highest price achieved by the company's stock is the IPO price. The IPO shares end up in the hands of the Depository Trust Company of New York and thus form the basis for professional short selling of the new public company's shares. Short selling can destroy any company's share price. Meanwhile, the company's insiders and early investors sit like vultures awaiting the chance to sell their shares as soon as legally possible. More often than not, buying IPO shares is like laying your money on a table next to a Black Hole. Both the table and your money are sucked into the abyss and are never seen again.

Private Investment in Public Equities (PIPEs) is a merchant banking strategy. The investment group buys shares of a public company and holds the stock, as the Law requires. Once the merchant bank can sell their PIPE shares the investors benefit from the PIPEs liquidity and the Market Capitalization leverage that publicly traded shares off the investor. The problem with PIPEs is that the public company insiders can dump their stock as the merchant bank is forced to hold their shares for a specific time. The result of insider dumping and professional short selling is the share price drops and the merchant bank loses money.

An IPO PIPE is a strategy that was developed a few years ago by the Global Village Investment Club (GVIC) [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]. The strategy solves many of the shortcomings of both the IPO and the PIPE financing. It offers the investing public a less risky stock speculation. It saves the public company millions of dollars.

Here are some of the advantages to a GVIC IPO PIPE

1. It reduces the shares that go to the Depository Trust Company of New York by about one-third. Thus making professional short selling riskier.

2. It eliminates insider selling by not allowing the insider shares to be registered with the Securities and Exchange Commission (SEC). Without registered insider shares being dumped into the Market, there is little downside pressure on the company's share price.

3. It gives the PIPE investors reasonable control as to how the public company's investor relations' budget is spent.

4. It eliminates the costs associated with doing "Dog %26 Pony" Shows to brokers so that the brokerage firms will participate in the IPO.

5. Since the Company is not seeking to do an IPO, it makes it less costly to get the company's shares trading.

6. Since GVIC will only do an IPO PIPE for an operating company with revenues and pre-tax profits, the investors have less risk of the company going public and then going into bankruptcy.

7. The GVIC public company formula leverages a relatively small PIPE investment into a small fortune in a few years because the exit strategy is not a "liquidity event" for insiders but an acquisition of the public company by a multinational corporation.

8. GVIC works with non-U.S. companies because management salaries and perks are reasonable, unlike the States. Corporate overhead costs are lower. Companies in Asia and elsewhere are growing faster than their American counterparts.

GVIC requires a global vision. Most of its members see a bleak future for Western Civilization and are using the IPO PIPE strategy as insurance that their families may not have to pay the price to be exacted by environmental stupidity and growing political rigidity. You may not share the Venture Capital Club's views or meet their membership requirements. However, doing IPO PIPEs has proven to be very profitable. If GVIC isn't your cup of tea, find a well-established venture capital group doing IPO PIPEs that meets your expectations.

Conservative investments don't return enough interest to offset inflation and taxes. High yield investments are either extremely risky or outright swindles. IPO PIPEs limits investment risks to the legal holding period for the shares. It allows you to invest in a public company without downside risk. If you pick the right venture capital group, your upside reward will be a multiple of your risk capital.

He is the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/]. He's the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] He's a Venture Capital %26 Equity Finance Consultant
[http://home.earthlink.net/~beowulfinvestments/williamcateventurecapitalampequityfinanceconsultant/]

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