I’m in Vegas for the Thanksgiving weekend. Their Sunday paper had a great article “Going Public not Easy” http://www.lvrj.com/business/11801851.html . It covered many of the ins and outs of going public and the new rules that will go into affect in December regarding Sarbanes compliance for OTCBB companies. Used to be that OTCBB companies were the good alternative for angel investors wanting a company to produce a liquidity event but not wanting to incur the high cost of a traditional IPO and the length of time it takes for a company to reach a point to be worthy of trading on the NYSE. It seems a lot of that incentive will change when the new rules go into effect. Ultimately, this will continue to add fuel to the acquisition market. Traditionally, over 80% of the exits for angel investors have come through acquisition, whether from a private equity fund or a straight acquisition by another company. The likelihood of a merger acquisition buy out being the way an angel investor will get their liquidity will continue to grow as the demands of the regulatory issues grow for public companies. When a company goes public, private investors owning shares in the private company can then sell their shares to the public. When a company is acquired, the source of the acquisition is buying the private shares of the company at the company’s current valuation or an industry accepted formula such some multiple of the EBITDA. Big notable acquisitions such as the YouTube acquisition are based on a perceived value, rather than a profit measurements. One point made in the article that is relevant for angel investors seeking their liquidity event is that when an aquisition is made through the transfer of stock (like when a public company buys a private company), capital gains are avoided. There is a downside to that, as we saw during the dot.com collapse, if the public company’s stock falls in value, then the actual value of the aquisition also falls.