1. Have you determined the pricing range of the shares of the shell?

Many CEO’s have unrealistic perceptions of the value of their company. They vision their stock being worth substantially more than its true inherent market value. The best way to value your company is to research market pricing and PE ratios of comparable companies within your industry segment. It is always best to err on the side caution - so use a conservative method to determine the value of your company.

There is a balancing act that takes place between the valuation of your company and the pricing of your shares. If the shares are priced too high you will have an immediate problem with “short sellers”. The only way to prevent this is to have a huge number of investors lined up to purchase your shares in the open market to support your stock and combat the short selling your stock. However, keep in mind most investors in OTCBB stocks are accustomed to purchasing shares at much lower prices so the smart ones will wait until the short sellers have pounded down your stock and then they will buy shares.

I have heard many a CEO insist on starting the stock at $5.00 a share. Their thinking is that if the stock starts at $5.00 a share it will still go up and the company will be able to qualify for a NASDAQ listing that much faster. Sorry, but this type of thinking can lead to a disastrous outcome. In my last chapter of this series – Chapter XII – we will compare two different stock price scenario’s to better understand what happens in the marketplace and how this can effect your PIPE financing.

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