Shell Prices Heading North
By David Feldman at 24 January, 2010, 12:05 pm
Another sign that things are beginning to recover for the RM world - following a steady decline which started in mid-2008, shell prices seem to have turned the corner and are going up again. For much of the early 2000s, trading “legacy” shells went for between $150,000 and $250,000. As things heated up so did prices, especially as demand seemed to far outstrip supply of clean shells. By mid-2008 there were a few shells deals that involved over $1 million. There were a solid few years there when prices were about $750,000. This caused many to want to work hard to get control of new shells, and unfortunately encouraged others to try to create new trading shells through questionable tactics.
Until just a few months ago, prices of legacy shells had hit a low of about $200,000. This was tough for some who bought shells a few years ago for much more than that. Also there was a glut of supply as the deal volume went down in the last year or so. For awhile in 2009 we were seeing prices of about $200-$250,000. Lately the prices have moved up to more like $300-$350,000. I even saw a deal at $430,000.
Some of this is a little unclear since every deal is different and has different components. Many shell mergers do not involve any cash, but merely a shell player looking for equity in an exciting growth company. Others take less than a market amount of cash in exchange for more equity. Others are shell principals playing other roles in deals such as investment bank and others, which somewhat muddles what cash and equity is for what. But there is no doubt “prices,” however one describes that, have moved up lately.
Even Form 10 shells’ prices have come up. At the height one could buy 100% of the stock of a Form 10 shell for $200,000. This went down to roughly $50,000 for a quality shell not created by a “shell mill.” Nowadays we are back up to the $75,000 to $100,000 range. That said, I do occassionally come across a client that created a Form 10 shell but did not find a deal and is ready to shut it down, and is therefore willing to sell for a much lower price. Those deals are few and far between, and slowly the market is ridding itself of players whose timing may not have been perfect as to when they set up their shell.
But all in all good news for shell owners.
Thanks for the inlighting information hopfully we are turning the corner.