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STRUCTURING THE SHELL TRANSACTION
- Determine the market capitalization of the private company. Compare the sales and earnings of your company to those companies in the same industry that are no public.(example: if your company is earning $5 million per year and the average public P/E ratio of public companies in your industry is 20, then your initial market capitalization should be $100,000,000.)
- Divide that number by the initial share price you would like to have on your stock. This price should be at least $5.00 per share. (example: $100,000,000/$5 = 20,000,000 shares.)
- Multiply that number by the percentage of the shell shares that you have negotiated with the representatives or officers and directors of the shell (example 90 - 10% = 18,000,000 shares)
- Subtract this number from the total number of shares outstanding as determined in "2" above. (example 20,000,000 - 18,000,000 = 2,000,000 shares)
- The outstanding shares in the shell will then be reverse (or forward) split to equal the number obtained in "4" above.
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