Thought this was pretty cool.
How to value a Shell Stock?
Major Considerations:
-Verified Shell Stock Looking For an Acquisition: It should be actively looking for a reverse merger. Verification can come from SEC reports, news releases, or verbally from company management.
-Experienced Management: Management must understand the mechanics of a reverse merger and know a good business opportunity. If management is not experienced, it is imperative they are working with an experienced consultant.
-SEC Reporting: it must report regularly to the SEC. This is known as a "reporting company." We want to be able to verify information about the company from public/legal filings, not by word of mouth or rumor. Believe it or not, there are public companies that are non-reporting.
-Clean: It has little or no debt, no pending law suites, and little or no outstanding convertible securities (preferred stock or warrants). We don't want anything that can complicate the reverse merger.
-Small Number of Outstanding Shares: The smaller the number of outstanding shares, the better. A smaller number of outstanding shares lessens the chance of a Reverse Stock Split. A Reverse Stock Split can lessen the chance of price appreciation.
-Low Market Value: This is the buy low sell high rule. A Shell Stock with a low Market Value will have a greater chance of price appreciation than one with a high Market Value. (Market Value = price X shares outstanding). Note: the Profile List by Market ----Value sorts the Shell Companies from low to high Market Value.
-Cash On Hand: Some Shell Companies have cash remaining from their previous business endeavors. Having cash to fund the new company's business plan will attract high quality candidates.
Minor Considerations:
-Tax Loss Carry Forward: The new company can offset future net income with the Shell Stock's Tax Loss Carry Forward.
-Exchange Listed: It is better for the Shell Stock to be listed on a stock exchange (NYSE, AMSE, NASDAQ, OTCBB). But, there are some quality Shell Companies that are trading on the Pink Sheets.
Indicators:
-Increased Volume/Price: Increased volume and price with no news may be an indicator of a potential reverse merger. Information on a reverse merger sometimes leaks out and insiders/family/friends start buying before the reverse merger is announced.
-Corporate Activity: Cleaning up debts, law suits, and issuing reverse splits can indicate management is getting the shell company ready for a reverse merger.
