1. Why would Institutional Funds invest in young companies?
The American Retirement Funds are managing assets, directly and via their “state keepers”, at a total value of dozens of billions of dollars. While most of their capital is invested in safe and solid assets they are willing to devote a small percentage in investing in selected promising emerging companies, addressing real market challenges in fields such as Life Science, Renewable Energy, Medical Devices, Cleantech etc.
The Funds’ investment policy is guided by the core belief that an innovative breakthrough technology, which is not available on the American market and resolves a genuine market problem, has immense value and would greatly contribute to the American and global society.
2. What is APO (Alternative Public Offering) ?
Alternative Public Offering’s (APO’s) were designed as alternative investment vehicles to enable emerging growth companies to enjoy the inherent benefits of becoming public without the major drawbacks of a full-blown IPO.
Since 1997, thousands of companies throughout the world have become public via APO’s on the OTCBB.
3. Why are APO’s not well known outside of the USA?
One of the reasons that APO’s are not well known is because the current Israeli marketplace ‘does not’ allow for this knowledge to be commonplace. Think about it: if, with an APO you are paying much less then “IPO” fees and it is taking you less than six months to finish the whole process, you are too small-time for most of the international firms in Israel. Another reason is that OTCBB is relatively new to the marketplace -only a decade in operation.
Yet, OTCBB is not an exclusively American old-boys ‘club.’ There are numerous European and Asian companies listed.
4. What is the difference between the process proposed by Spark and a full-blown IPO?
APO registration process allows the Company to raise capital by marketing its shares directly to the Funds, which are in fact an already committed prospective pool of shareholders.
Registering to public listing at the OTCBB is also considerably less time-consuming and expensive than going for a full-blown IPO. Moreover, it does not have the restrictions that are usually associated with IPO, such as setting up complex reporting and auditing systems within the company.
Nevertheless the company must provide the following:
a) A prospectus to its prospective and existing shareholders,
b) Audited financial statements (US GAAP),
c) Accurate and up to date stock information available to the public.
5. How long does the process take?
Spark’s due diligence will last about a month, and will cover legal, financial and technological assessment. At the outcome of the due diligence process Spark will start constituting the Dossier in coordination with the company.
Once the Dossier is completed with additional documents it is submitted to the OTCBB. Spark files for the Fast Track Listing (FTL) process, which is an accelerated procedure for registering as a publicly traded company. It takes about 6 months until the company is allocated the publicly traded company symbol from the moment the Dossier is submitted.
The whole process handled by Spark lasts thus about 8 months, from MOU engagement with the company, till they receive the financing from the Funds.
6. How costly is the process supposed to be?
Due Diligence is made at Spark’s expenses – and the overall expenditures incurred by the whole process for the company are amounting to $150,000, excluding internal set up costs which differentiate from one company to the other.
7. What additional advantages are there in the process?
This process eventually enables the company and its products to benefit from wide international exposure. Spark provides a fresh, true and safe opportunity to leverage the company’s reputation and positioning and forward its product development and marketing.
Moreover as a publicly traded entity the company benefits from enhanced liability with prospective customers or partners as well as with future employees.
8. What is the OTCBB?
The OTCBB (OTC Bulletin Board) is an electronic quotation system in the United States which displays real-time quotes, last-sale prices, and volume information for many over-the-counter (OTC) equity securities that are not listed on the NASDAQ stock exchange.
9. Isn’t the OTCBB terribly small?
Keeping in mind that the OTCBB is but one decade old, surprisingly and impressively, there are 4,100 plus companies actively trading there. Among those who started on the OTCBB are Warren Buffet’s Berkshire Hathaway, Turner Broadcasting System, Occidental Petroleum and many others. So, in our opinion, you are in ‘good company.
10. Who are the heavy investors on the OTCBB?
A large portion of the investors are institutional. That’s one of the reasons that, while we can’t promise that a stock float will be successful, we do have a very good idea of how much we can generate in any single float. In most cases, the institutional investors are looking to invest but a small percentage of the total portfolio under their management on the OTCBB. But remember, their ‘small’ percentage can translate into a good many investment dollars for your company.
11. Isn’t there a low trading volume problem at the OTCBB?
Trading volume, like any other market factor, separates the chaff from the wheat. The record shows that companies who exhibit strong potential and have been listed by the fast track process, have succeeded in attracting pipe funding from institutional funds. Generally speaking, an investment by a private equity fund indicates that: (i) the company has improved its financial position; (ii) savvy investors believe in the company’s future; and (iii) now’s the chance to get in on the ground floor while the stock is still undervalued.
Companies listed on FTL generally enjoy a long “honeymoon” period in the marketplace, as reflected in the stock’s price and trading volume.
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