Imagine being trapped inside a burning house with no idea where the exit is. The same sobering realization occurs to investors who suddenly find themselves in an investment gone bad or when Life circumstances require they get out quickly. If there is no exit; there is no escape.
An “Exit” to an investor is that day when he/she finally departs from an investment. At best, he/she will depart with all their principal funds plus a very handsome “return” earned by those invested funds. At worst, the investor is trapped and goes down with the burning house.
Knowing when, where and how to exit an investment safely (vs. a body bag) is a skill set learned by most investors through hard lessons. Once learned, it should be one of your most important factors for deciding whether or not to enter into any investment opportunity.
What if you have already entered the investment and found it to be a concrete building with no windows or doors? It is never too late to start looking for your exit. Before you need it; start creating one even if it is to cut holes in the walls, ceilings or floors. Or try going out the same door that you came in.
As CityGuru Investors we have been told during the funding pitch that we have two exits that will not only assure us of our investment’s safety but an unimaginable wealth as well. But with a little Due Diligence, one can have cause to wonder if the exits are merely illusions fabricated out of naivete or deceit.
Going IPO—CityGuru, Inc. Exit A
Since most CityGuru Investors have exchanged their savings for equity, or shares in the company, the dream of going IPO one day seems the logical and most desirable exit of all. Selling one’s CityGuru, Inc. shares on a Stock Exchange where thousands may be bidding ever higher prices for our shares than what we bought them for is, indeed, enticing…even possible.
However, the realities of an “Initial Public Offering” or (IPO) is something few companies dare to take lightly. And all that do attempt it, don’t always fare well; FACEBOOK’s IPO comes to mind. Not only must a private company (such as CityGuru Inc.) run the gauntlet of merciless audits and inspections imposed by the Security Exchange Commission (SEC), but the process can be a mine field of risks, years of arduous preparation and even backlash on the price of company stock.
As a IPO candidate, City Guru, Inc. has moved little off its “startup” mark and is already 4 years late to the party in developing its corporate, managerial and market infrastructure. With its complete lack of accounting, financials and professional management CityGuru, Inc. is not yet in a position to face a single SEC audit. That is not to say, however, that the company can’t be reorganized to position for eventual IPO. But this doesn’t bode well for us as CityGuru Investors since it could be several years before we could expect pay-back in an IPO.
Presently, going IPO seems more like an Exit sign painted on a brick wall.
Merger/Acquisition/Buy Out—CityGuru, Inc. Exit B
What about the suggestion that CityGuru, Inc. might be a target of a Buy-out; a merger or acquisition by a more powerful, cash-rich company? Such a company might be willing to pay premium price for our shares.
It could happen…but if it does it will be for the same very special reasons any company will buy out or merge with another company:
- To remove formidable competition;
- To acquire the special talent, technology or expertise of the other company;
- To acquire the assets of the other company;
- To complement the Acquiring Company’s own Brand, Market Share, etc.
The fact that CityGuru, Inc. cannot attract a lucrative Buyout doesn’t mean that it may not attract another type of reason for Buy-out. Stronger companies will also buy a weaker company who is struggling with insolvency for the sake of acquiring it at a bargain price. A company being acquired for pennies on the dollar hardly enriches the former shareholders!
Considering a Buy-Out as an Exit for CityGuru Investors is best left to only the most patient of investors willing to wait 10-15 years with no guarantee pay-out.
Is there an Exit to CityGuru, Inc?
For those of us who are already in the investment, it presently seems there are no easily-accessible Exits. However, we can minimize the risks by offsetting them with earnings on our invested money. This can include interest income, dividends, and other distributions of investment funds made payable to CityGuru Investors until other viable exits are created.
Founder Drew Morrison has reported that he and Advisors are finalizing a new “Revenue Model”. Perhaps this is an opportune time to open discussions on Finding the Exit and how his new business model might accommodate that.
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