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Creating and Selling stocks of my ltd

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  1. #11

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    May 2006
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    Quote Originally Posted by jolan:
    i know about all other options and why this might ( too any of you ) weird or not interested.
    however i am not gonna unfold all details due to competitive reasons.
    Now, the question if it would be interesting for a stranger or not is no issue here either.

    So let me try again... what are the cons for selling 1 or more stocks to multiple unknown individuals?
    if there are serious cons, are their any alternatives (cheap ones) that have the same effect but without the cons? (Going to the stock market is obviously no option)
    Ok, lets start with the basics:

    You want to sell part of your company so you can get money.
    You want money so you can increase your marketing and supply so you can sell more of your product and increase your revenue.
    You want to increase your revenue so you make more profit.

    Assuming the above is correct...
    Getting cash into the company is a great thing, but selling off part of the company can have long lasting negative effects.
    Yes, having one "new" shareholder (of even 1% of the total shares) will change the way you have to do your accounting and reporting.

    The normal scenario would be something similar to you see on the Dragons Den, when you get a professional investor to buy some of the company off you. If you value the company at $1m (by whatever valuation) and you want $200k, he would be expecting to get 40% of the company (not 20%) as he is taking on risk. He would also be wanting to be a Director of the company, receive the monthly management report, approve budgets, salary increases and capital expenditure.

    Selling off small amounts to many people is not only impractical, but near impossible. Who invests money in a company that they has no track record, whose management you don't know and having an investment that you can't transfer or cash out easily?

    If your company is valued at $40m and up, I have a contact that can help you out to put you in touch with the right people. (serious corportate investing)

    If your company is smaller and if you believe in your company, get more loans (mortage your house and extend your credit cards). It will pay off exponentially in the future, if your business is really that good.

    How big is your company? How many employees?

    Maybe you need a partner - someone to come into the business and work with you as partners. This can be infinitely easier than being shareholders in a company. Effectively the partnership (split in whatever proportion you want) will be your company and the new partner owning the business.

    If you are looking for a partner, I may even be in a position to be interested.
    If you want to pm me some basic details I would be interested to have a look at them.
    jolan likes this.

  2. #12

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    Quote Originally Posted by Boris:
    There are no " cheap " options regarding stock issue for anyone with any real sense and if all your thinking about is that then ............. get a bank loan.
    If your company is worth investing in then your Balance Sheet will show that and support a loan. The advantage being that you still get to keep your stock. If the bank won't invest then why should anyone else?
    What utter rubbish. Big difference between lending (what banks generally do) and investing...

  3. #13

    Join Date
    Mar 2010
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    Back to the OP's questions. What are the cons?

    1. A shareholder in a private company will want to have a say in management to protect his interests. I.e. He wants the right to appoint a director.
    2. Having an additional director might affect your daily running of the business.
    3. You will need to have directors' meetings for important decisions.
    4. In the event that you decide you wanted more say in the company, you cannot just expel the shareholders. You need to buy them out or find someone else to.

    It looks like you're only after additional money and not the expertise of the new shareholders. As said by others, you can consider bank loans.


  4. #14

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    Mar 2010
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    BTW, you cannot just increase the share capital of the company from, say, $10,000 to $1,000,000 and think that you have created $990,000 worth of value that can be sold out. A shell is still a shell.


  5. #15

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    Mar 2006
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    These are good questions and some of the guys who can share their experience at with TEN - The Entrepreneurs Network of Hong Kong - meeting with speaker tonight in Wanchai from Invest Hong Kong. $100 entry gets you a drink. Good Q & A and a chance to find out how others do it.