About BCGU
Business Consulting Group Unlimited, Inc. ("BCGU") is a boutique merchant banking firm servicing select Small and Micro Cap publicly traded companies, ultimately allowing managers to effectively operate a business for the benefit of shareholders. BCGU accomplishes this by providing solutions to emerging growth businesses in the areas of: (1) merger and acquisition advisory; (2) management and accounting consulting and restructuring advisory; (3) SEC and transactional legal services; and (4) shareholder development. BCGU also often acts as a principal investor through its in house hedge fund which has more than USD $10,000,000 of committed capital. BCGU's commitment to the Small and Micro Cap market is unsurpassed and BCGU's success is founded on delivering professional solutions that add shareholder value. As a firm, BCGU believes in the highest standard of ethics, and takes pride in the firm's commitment to hard work, fairness and equity. More information on BCGU is available at http://www.BCGU.com or by contacting BCGU directly at (760) 230-2300, or if you are in the United States, (877) 774-1288.
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What does a hedge fund do? :
Hedge fund
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A hedge fund is an investment fund charging a performance fee and typically open to only a limited range of investors. In the United States, hedge funds are open to accredited investors only. Because of this restriction they are usually exempt from any direct regulation by the SEC, NASD and other regulatory bodies.
Though the funds do not necessarily hedge their investments against adverse market moves, the term is used to distinguish them from regulated retail investment funds such as mutual funds and pension funds, and from insurance companies.
Hedge funds' activities are limited only by the terms of the contracts governing the particular fund. They can follow complex investment strategies, being long or short assets and entering into futures, swaps and other derivative contracts.
The funds, often organized as limited partnerships in the United States, typically invest on behalf of institutions and high-net-worth individuals. A common objective is to generate returns that are not closely correlated to those of the broader financial markets.
Hedge Funds are prohibited, in most countries, from marketing to non-accredited investors. At the same time, they are not required to reveal to the public any information about themselves or their activities. Thus hedge funds generally exercise extreme secrecy and little is known with certainty about the activities of specific hedge funds or the industry as a whole.
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To paraphrase P K G , hedge funds, among other things, buy blocks of stock at a big discount to the market directly from a company and dump them on the public market at a big profit. The company makes money via dilution usually because it can't make it any other way, and the principals in the hedge fund pocket cash in copious quantity. The retail share holder gets to watch his diminishing stock shrivel up and puff away in a vaporous cloud. Hence, it's a paper sale.
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The vehicle this unregulated old boy's network of fat cats uses to skin the public is called a "Private Placement". It is the afore mentioned buying of newly printed paper from a worthless company at a big discount ( a fraction) to what the shares sell for on the open market. Let's say the share price of HYRF is a penny. The hedge fund buys tens of millions of newly minted shares at .001 each. There is some fluffy PR work , hints from management of good things around the corner, etc. The cheap shares are gobbled up by dolts like us. Company officers and hedge fund fat cats pocket the money...we get to watch the price of our worthless shares diminish thanks to dilution and the non performance of the company. All of this is unregulated.
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Private placement
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The factual accuracy of this article is disputed.
Please see the relevant discussion on the talk page.
A private placement is a direct private offering of securities to a limited number of sophisticated investors. It is the opposite of a public offering. Investors in privately placed securities include insurance companies, pension funds, mezzanine funds, stock funds and trusts. Securities issued as private placements include debt, equity, and hybrid securities. In the United States, private placements are exempt from public registration under the Securities Act of 1933. The exemption from registration for a private offering is contained in Regulation D of the Securities Act of 1933. While the procedure for conducting a private placement pursuant to the exemption is less stringent than for that of a public restrictions of Regulation D.
Those requirements typically require the use of a private placement memorandum, which, for all practical purposes, complies with the requirements of a prospectus which is required in public offerings. The important aspects of the offering are covered: a description of the terms of the offering, the company's business, risk factors, additional terms (i.e., antidilution protection, registration rights, control features), expenses of the transaction and summary financial information. The purpose of the summary is to make the offering easy to read and understand. As stated, suppliers of capital are inundated with business plans and private placement memoranda; the sales-conscious issuer must get all the salient facts in as conspicuous a position as possible if he hopes to have them noticed.
Private placements can only be sold to certain sophisticated investors. In the U.S. these are called accredited investors, and they are defined in the U.S. Securities and Exchange Commission's requirements for a Reg. D offering.
Issuers should approach offerings that have stated maximums and minimums with caution. The SEC has made its position clear. If the issuer elects to increase or decrease the size of the offering above the stated maximum/minimum, each of the investors who have signed subscription agreements must consent to the change in writing. It is not open to the issuer to send out a notice to the effect that "We are raising or lowering the minimum and, if we do not hear from you, we assume you consent."
Regulation D is a government program created under the Securities Act of 1933, instituted in 1982, that allows companies the ability to raise capital though the sale of equity or debt securities. The programs were designed to provide two main things - an exemption to sell securities in a private transaction without registering the securities (something that happens in any transaction involving investors) and the appropriate framework and documentation for doing so properly. Regulation D Offerings are the practical method companies use to raise capital from individual investors. Who should use a Regulation D Offering? Any company or entrepreneur that is seeking to raise equity or debt capital from investors.
There are 2 basic types of Regulation D Offerings that can be structured:
An "equity" offering is where the company sells partial ownership in the company (via the sale of stock or a membership unit) to raise capital. Equity offerings are preferred by early stage companies because there is no set repayment schedule or debt service payments - the investors profit when the company profits.
A "debt" offering is where the company raises debt financing by selling a note instrument to investors with a set annual rate of return and a maturity date that dictates when the funds will be paid back to investors in full. A debt offering functions much like a business loan except instead of a bank providing the financing it is a group of investors lending funds to the company.
Preparing a Regulation D Offering is very straightforward. It involves three primary steps:
1. Pre-Offering Structuring: Most entrepreneurs are not experts in raising capital - and thus typically have poorly structured transactions. An improper or non-existent transaction structure will portray a very unprofessional image of you to potential investors. Thus, the very first step in an offering is properly setting the transaction structure and, in equity transactions, company share structure.
Pre-offering structuring typically includes such items as setting share price or note amount, determining how much of the company to sell (in equity situations), which Reg D program to use, setting the maturity date and annual rate of return for corporate notes (in debt situations), share allocations to principals so they maintain a set amount of control in the company, minimum and maximum offering amounts which set the effective range of the offering, minimum amount of investment per investor, etc.
2. Document Creation: Step two of preparing an offering involves the creation of the related Regulation D offering documents. These documents include:
Private Placement Memorandum: The Private Placement Memorandum, or "PPM", is the document that discloses all pertinent information to the investors about the company, proposed company operations, the transaction structure (whether you are selling equity ownership or raising debt financing from the investors), the terms of the investment (share price, note amounts, maturity dates, etc.), risks the investors may face, etc. Do not confuse the detailed disclosures and transaction structure in a PPM with the general information a business plan provides - they are not the same.
Subscription Agreement: The Subscription Agreement sets forth the terms and conditions of the investment. It is the "sales contract" for purchasing the securities. It is practically impossible to raise capital without this document - investors are not going to invest into your company or opportunity based on a handshake. Would you invest into a company without having the terms and conditions of the investment set in writing and agreed to by both parties?
Promissory Note: In debt offerings you need to have a Promissory Note outlining the terms of the loan arrangement with the investors. The note is the actual "loan document" between the company and the investor.
Form D SEC Filing: The Form D is the notification filing that is sent to the SEC in Washington, DC. It notifies the SEC that you are using the Regulation D program and provides them basic information on the company and the offering. It is not an approval document or registration - it is merely a filing that notifies the SEC that you have a Regulation D Offering in place.
3. Marketing: The offering is now ready for marketing to investors.
A Regulation D Offering will solve all of the technical issues you will face when dealing with investors (investment structure, investment documentation, etc.) - these are issues that should be addressed before you interact with investors. Not addressing them ahead of time presents a very unprofessional image of you to the investor.
The Regulation D Programs can be used by domestic as well as foreign corporations. While the programs can be used by any corporation type - the preferred structure is a stock "C" Corporation or Limited Lia
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