“MBNE can help insulate
you and your company from the challenges of being a public stock company
through our Special Partnering Program. Dr Morris has more than 20 years
experience handling the reporting and compliance details of being a
Almost all owners/managers and investors want to significantly increase
the value of their companies as a primary goal. And all involved realize
that greater revenue and income define a successful company. However,
one of the greatest value increases in company value comes from taking
a private company public or by properly managing a public stock company.
And to realize and enjoy the wealth of owning stock, generally the investor
needs to sell some shares and/or borrow by using the shares as collateral.
In either case, it is generally necessary for the stock to be public
and trading. Therefore, helping to create liquidity for a partner is
primary goal of MBDE
Although your specific financial goals will help to determine exactly
how we accomplish our assignment in helping you increase the value of
your company, there are certain standard decisions and activities we
One of the first decisions is to determine your readiness to become
a public stock company. Becoming a public stock company can be overwhelming
and anxiety producing if that is not what you do professionally.
Dr George Morris, the president of MBDE has worked done for over twenty
years in corporate finance including taking companies public and maintaining
So why bother to go public? Because this one strategy can increase the
value of your company many times over. And with our “Special Partner
Program” we can target a very large market cap value for your
company when and if you and the company are ready.
Growth as a Private Company
The best use of capital in
a private stock company is to growth net earnings. Whether you are seeking
a higher income and dividends for your shareholders or building the
value of your company, higher earnings a measure and the fuel for continued
However, most business persons
and investors realize the additional capital invested in a “good”
growing business will product higher returns of earnings and business
So, money is invested and a company grows.
The challenge is to grow
the company as fast you can so everyone involved can get the benefit
as soon as possible. And beating this challenge is very dependent on
raising new investment capital.
As a private stock company, the options for investment capital are somewhat
limited in source and quantity. Some typical examples for equity capital
are family and friends, angles, venture capitalists and strategic partners.
The debt capital sources include banks and commercial lenders that either
is almost impossible to deal with their collateral and loan terms.
So what can we do to help
you sell stock privately or borrow on some reasonable terms?
Following are options:
The most typical form for
legally raising smaller amounts of equity capital for your business
is a Private Placement Securities Offering. This form relies on an exemption
from registration with the US Securities and Exchange Commission. There
are very important rules to be followed for raising the money and usually
a securities attorney is retained to help you create a Private Placement
Memorandum (“PPM”) for presentation to each and every investor.
The PPM helps protect you and your company from law suits if everything
doesn’t work out as your investor expects or thought it would.
The PPM containing your financials and other relevant information is
what you are representing to the investor.
Legal and accounting fees
can range from tens to a $100,000 dollars and can take a few weeks to
a few months. We have on going relationships with lawyers and CPAs that
emphasize speed and economy for our team clients. If you do it for the
first and only time, you will probably spend more then are fees and
waste significant time.
The acceptability of a private
placement by potential investors can be a challenge for raising the
money. Most licensed investment bankers won’t bother with a private
placement especially if it is not part of a subsequent public offering.
And any astute investor will be concerned about the liquidity or exit
from the investment which means how an investor gets their money back
in success or failure.
We can help you with presenting
your private placement to families and friends, angels, venture capitalist,
licensed investment bankers and institutional investors, Also, the financial
structure of the deal may determine success or failure.
Not using a good team including
a securities attorney and CPA could be devastating to you personally
and your company. So if you don’t use us, please find another
ethical, legal and experienced team that will help you and not ruin
Sooner or later, significant growth in the size, earnings and value
of your company will mandate the company be a public stock company or
a subsidiary of one another public company.
And, why should it be a public
stock company especially it the simple fact that your company could
be worth about four time more as a public company versus a private company
given he same earnings.
Price Earning Share Evaluation
The share value of publicly
traded companies is usually valued in terms of the earnings per share
and the price earnings multiple (“PE”) which is: "How
many times the price of a share of stock is worth in the market times
the earnings per share." The total market value of company or “market
capitalization" value is the total number of shares outstanding
times the price per share. So the higher the earnings and/or the higher
the PE, the higher the total value of the company.
One statement that has always impressed me is: “the true value
of a CEO (or management team) is the value of their company’s
stock.” Warren Buffet understands and appreciates the concept
and so do I.
Public versus Private
One of the best legal strategies on Wall Street is realizing the gain
for shareholders between the difference of being a private and public
company. The value of a privately owned company is typically 3 to 5
times earnings and the value of a publicly owned company is 15 to 25
times earnings, and both private and public values are dependent on
a large group of similar but not identical variables. Therefore public
stock is worth 3 to 5 times the value of a private company stock.
The difference between public and private price earnings ratio (PE)
occurs from natural stock market forces concerned with liquidity or
the ability to sell your stock for cash whenever you want. The stock
of a private company is considered illiquid since there is no organized
market to sell your stock. You may be able to sell your shares back
to someone associated with the company but you are still dealing with
a private company in a private transaction and the relative little money
that you can sell it for reflects that fact. The demand for a particular
company shares may vary and that will affect the PE multiple, but all
things equal a public company’s shares will be worth 3 to 5 times
more than a private company’s shares.
Value of Information
In addition, reporting public companies have to disclose their earning
through quarterly reports to the SEC along with any significant events
that can effect the a company’s performance and share value in
the market. This reported information is valuable for making investment
The SEC does not recommend stocks, but it is concerned with transparency
for all events that can affect the company. That means giving honest
and complete information to shareholders and the public. A private company
or even some non-reporting public companies either make no disclosure
or very limited reports. Intelligent investors want more accurate information.
Public Stock Can Be Like Cash
Beyond the liquidity and full reporting of listed public companies,
there is the ability for those companies to use their stock to raise
more operating cash, to do acquisitions of other companies, their earnings
and assets, to attract more good management and license or buy technology.
Theses acquisitions could and should further increase the earnings and
PE ratio of a company’s shares. Also timely reporting information
is valuable for making investment decisions, and investors are willing
to pay a premium for a stock that is public and reporting in the form
of a higher PE ratio.
The factors discussed above affecting a share price of a company have
to be coordinated and fine tuned to maximize the value of the shares.
Most investors are interested in maximizing the share prices. And investors
are willing to pay a higher PE ratio premium for a stock that is public
Build Value With A Team
Building the market value of your company can be very simple but extremely
challenging. Experienced business entrepreneurs and founders know that
capital and management applied to a great business model can lead to
very successful, profitable ventures and valuable companies. However,
they also realize that investing their own time and energy is usually
not enough to maximize the value of the company in our complicated world.
Therefore attracting and keeping the best management team through public
stock options is perhaps the most important value of being a public
These are some of the reasons
that your private company could increase in value 3 to 5 times as a
well run public company. Do you want to significantly increase your
the value of your company involves many activities that our team has
experienced. Each opportunity is specifically different in many ways
and requires careful analysis and planning. Also, integrity and honest
by all parties is of maximum concern and importance.