If a company has no venture capital, is that a red flag? Should I not invest?
Sharie asks:
I am thinking about investing in a particular company that is supposedly in its IPO stage. I was told that the company has no venture capital and that the CEO (who is a billionaire) has invested his own money into the company. How do I find out if the company is actually in its underwriting stage to ensure that it is going public?
I am thinking about investing in a particular company that is supposedly in its IPO stage. I was told that the company has no venture capital and that the CEO (who is a billionaire) has invested his own money into the company. How do I find out if the company is actually in its underwriting stage to ensure that it is going public?
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There are a bunch of sites you can go to such as Lehman brothers.com or go straight to the SEC site. If they truly plan on going public then they should have already filed their papers with the SEC which is all public information. Moreover, what kind of company is it? How important is expansion capital? Lastly, Take a look at their 8-k/q and 10-k/q reports to see their plans for the next year
Sometimes having no venture capital is a good thing cause the 2 year threshold on the expected return is over 50%. That’s a huge commitment. Private capital may be beneficial and maintaining control may be a big issue for him (the billionaire). The problem is, is that since its private, the company is not required to be transparent about its holdings. That’s a problem.