Although it seems archaic to us now, it used to be the case that forming a corporation involved going door-to-door across the state searching for potential investors that would provide the cash that would fund the start-up operations of the corporation. If you were investing in an old timey IPO, one of your primary concerns was that someone else might get more advantageous terms for the IPO than you.
Imagine if a company was seeking $100,000 to start its business, and a farmer commits to paying $10,000 for 10% of the issued common stock for the business. As the initial promoters of the business searched throughout the state, they end up securing an additional $70,000 in exchange for selling the common stock ownership rights to 70% of this forming corporation.
As the search for an initial investor base goes on, the stock promoters find themselves stuck–there is a textile manufacturer … Read the rest of this article!