Shell Corporations Are Just Not Hollow Shells
Imagine yourself investing in a company that does not have any physical existence but is registered in the New York Stock Exchange? That’s how investment in Shell Corporations works. It is an organisation that works like a vehicle for business transactions, inspite of itself having no particular assets or operations. For any investor though, the most intriguing type of Shell Company to invest in is one that has been listed in the stock exchange.
Investors are often sceptical about putting their money in a shell organisation due to the lack of physical certainty. However, one can be more or less assured about investing in an enlisted company because given the significant amount of time and money that is needed to obtain a listing; listed shells have significantly higher value in the market even if they do not have any amount of significant assets.
Merging the possibilities for better returns
According to experts, most shell companies are created with the purpose of merging with unidentified companies, whether they are single or multiple. These companies had probably been initially created with some kind of a business plan that had somehow failed to materialise. It can also happen due to these companies going bankrupt. Ideally the purpose of these shells is to find a suitable buyer for the purpose of ‘reverse merger’ (acquisition of any public company by a private company, allowing the private company to bypass the lengthy process of going public).
The popularity of reverse mergers has gone up significantly over the last few years. Whereas the figure was only three in the year 1990, it went up to 236 in the year 2008. A large portion of this contribution has been made by shell organisations.
Shell Stock Investments are trustworthy too
Investing in shell stock can sometimes be a tricky option owing to the fact that they tend to decay pretty easily. Moreover, such stocks generally trade on very thin ice which is why even if the rates go up, you might not be in a position to sell it that easily.
That is why seeking guidance would be the most advisable option while going for a shell company stock. Besides following any investment expert closely, you can also follow stock’s activity over the net or on television.
The general temptation behind choosing shell stock appears to be its chances of mergers and acquisitions. Experts feel that since these firms have no operations, the sole reason behind investing in shells should be the future chances of a reverse merger agreement.
The key criterion for investing in a shell stock is patience. Sometimes shells can sit idle for years before something happens. Even if it does, the possibility of getting excessively high returns is minimal.
There is also a slight chance of getting cheated if you invest in any fraudulent shell organisation.
At the end, thus, it can be said that investment in shell funds can often be a tricky and risky option. For investors, the advice would be to invest if only you think that the possibility of a reverse merger is high and should be done within a stipulated amount of time. Do your research well and seek the expert’s guidance before you take the plunge.
Molly Biggs has authored this blog. Finance is the field which has always been of her interest and helps provide quick pay day loans service to people. You can also visit her website for more.