Public shells and the SEC

15 May

Yesterday, the SEC halted trading in 379 dormant companies, ostensibly because the public information was not up to date but really to stop the trade in “public shells”.  Here are a number of articles and references for this action.


My Take…

It never really made sense to me that when a public company went bankrupt and was liquidated, that the “public vehicle” portion of the company never went away, meaning that the public shares could still be traded.  One example of that is Henley Healthcare, Inc. – one of our board members at Systems Evolution Inc., which was publicly traded from 2003 through 2007 when it was taken over by Monarch Bay, founded Henley.

Even though we have done a number of “reverse mergers” or more properly described as Corporate Restructuring‘s or Recapitalization, I agree with the SEC in that I believe there are too many “public shells” out in the environment.

My Recommendation

First, make it easier to file to “go public”, which the JOBS Acts was supposed to do, but we have yet to see how the SEC and the individual states will implement the rules proposed by the Act.

Secondly, make the process of “de-listing” more transparent.  Currently, not even PCOAB Auditors, SEC counsel, FINRA, nor transfer agents really know the whole process and it is inconsistently implemented.  Of course, individual retail investors have no clue because the professionals in charge don’t know either.

Lastly, engage a professional with experience in maneuvering through this mine field.  Of course, this sounds incredibly self serving, but what can we say, “Call us…”

© 2012 by Rhodes Holdings LLC, all rights reserved except those referenced within the text.



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