Category: Blank Check Companies

Blank Check Companies: The definition of “blank-check company” as set forth in Rule 419 of the Securities Act is a company that, Is a development-stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person; and Is issuing “penny stock,” as defined in Rule 3a51-1 under the Securities Exchange Act of 1934…

Sep292015

SEC Footnote 32 and Sham S-1 Registration Statements

ABA Journal’s 10th Annual Blawg 100

——————————————————————————————————

Over the past several years, many direct public offering (DPO) S-1 registration statements have been filed for either shell or development-stage companies, claiming an intent to pursue and develop a particular business, when in fact, the promoter intends to create a public vehicle to be used for reverse merger transactions.  For purposes of this blog, I will refer to these S-1 registration statements the same way the SEC now does, as “sham registrations.”  I prefer the term “sham registrations” as it better describes the process than the other used industry term of art, “footnote 32 shells.”

Footnote 32 is part of the Securities Offering Reform Act of 2005 (“Securities Offering Reform Act”).  In the final rule release for the Securities Offering Reform Act, the SEC included a footnote (number 32) which states:

“We have become aware of a practice in which the promoter of a company and/or affiliates of the promoter

Jul292014

Direct Public Offerings by Shell Companies- Tread Carefully

We thank each and every one of our Securities-Law-Blog.com readers for your devotion and positive interaction. Without you, writing these blogs just wouldn’t be exciting. Nominate Securities Law Blog for this year’s ABA Journal Blawg 100 and keep the dynamic energy flowing. Our readers are our greatest strength. Click Here to nominate.
________________________________________

As I’ve written about previously, recently (albeit not officially) the Securities and Exchange Commission (“SEC”) has materially altered its position on offerings by shell companies that are not blank check companies.  In particular, over the past year, numerous shell companies that are not also blank check companies have completed direct public offerings using a S-1 registration statement and successfully obtained market maker support and a ticker symbol from FINRA and are trading.

Rule 419 and Blank Check Companies

The provisions of Rule 419 apply to every registration statement filed under the Securities Act of 1933, as amended, by a blank check company.  Rule 419 requires that the

Oct012013

SEC has Modified Policies on Offerings by Shell Companies

Recently, albeit not officially, the Securities and Exchange Commission (“SEC”) has materially altered its position on offerings by shell companies that are not blank-check companies.  In particular, over the past year, numerous shell companies that are not also blank-check companies have completed offerings using an S-1 registration statement and successfully obtained market maker support and a ticker symbol from FINRA and are trading.  As recently as 18 months ago, this was not possible.

Rule 419 and Blank-Check Companies

The provisions of Rule 419 apply to every registration statement filed under the Securities Act of 1933, as amended, by a blank-check company.  Rule 419 requires that the blank-check company filing such registration statement deposit the securities being offered and proceeds of the offering into

Jan052010

Rule 419 and Offerings by Shell or Blank Check Companies

The provisions of Rule 419 apply to every registration statement filed under the Securities Act of 1933, as amended, by a blank check company. Rule 419 requires that the blank check company filing such registration statement deposit the securities being offered and proceeds of the offering into an escrow or trust account pending the execution of an agreement for an acquisition or merger.

In addition, the registrant is required to file a post effective amendment to the registration statement containing the same information as found in a Form 10 registration statement, upon the execution of an agreement for such acquisition or merger. The rule provides procedures for the release of the offering funds in conjunction with the post effective acquisition or merger. The obligations to file post effective amendments are in addition to the obligations to file Forms 8-K to report both the entry into a material non-ordinary course agreement and the completion of the transaction. Rule 419 applies to