by:
Dave Lavinsky
A shell corporation is a institution that is incorporated but has no significant assets or operations. These corporations may be formed as an alternative venture funding mechanism.
Shell institution funding works in two ways. In many an cases, the shell corporation is created from scratch. The intention of these shells is to raise money and to get a number of shares outstanding into the public’s hands. In most cases, the shares are oversubscribed in units. That is, the shares are oversubscribed as one share of common stuck plus warrants at the current offering price.
The “empty” shell is then integrated with the operative
company. The integrated companies begin to report operative
results and once
the results are good, existing stockholders exercise their warrants and provide required capital into the company.
A second type of shell corporation is formed once
the institution seeking capital identifies an existing shell or inactive public institution (IPC) as a candidate for a reverse acquisition. This typically occurs after a public institution emerges from bankruptcy. At this time it may be void of assets else than cash. In fact, the principal plus of the IPC is its often its public registration and a listing
of shareholders from which new capital may be raised.
Shell corporations are a quick and cost effective way of taking a institution public and raising public capital. However, typically bridge capital is required to finance the process and take the institution to a point wherever
investors are interested in elbow grease their options.
Just about the author: GT Business Plans has developed over 200 business plans for clients that have put together raised over $750 million in financing, launched many
new product and service lines and gained competitive advantage and market share. GT Business Plans is the sister site of GT Venture Capital
