Are there SEC rules that govern the money a company receives from sales of stock?

Question

I am buying shares of "Pink sheet" stock. The overall daily volume is roughly 50 million give or take. At it's current price per share the company is receiving between $100,000.00 and $200,000.00 per month. How is this money accounted for? Does the company have to show the SEC where and for what the money is being used for? Some people suggest that the company owner is just "printing out the stock" and just plain keeping the money. Is it possible for a company to offer stock for sale, buy some equipment to make it look like the company is trying to establish itself, just keeping large amounts of the cash for themselves? Without ever really having any intention of even establishing itself as the company it portrays in its proposal to whoever they submit a proposal? Who do they submit a proposal too? Who holds them accountable?

Thank you!

Answer 1

Other than for public offerings such as IPO, the money that is paid for a stock is not going to the company but to someone who is selling their stock.

Now a company may be selling shares it is allowed to issue, its treasury shares. and it may buy its own shares off the market. But there is no requirement that they do anything at all with the money. They can use it to pay off debt, to provide liquidity, or even to pay a dividend. Ordinarily the company will identify planned uses for money from stock sold, but there is no requirement that they will use it that way right away.

Answer 2

es FTC

Answer 3

Sorry to disappoint you, but unless the company itself is selling you shares, then they are not getting the money you pay out to get those shares.

If I had some shares and you were buying but no one else seemed to be selling at that moment, suppose you wanted to buy at a dime a share, then I might ask 15 cents for a few of my shares and wait until you came up in price for them. With that, after the brokerages (yours and mine) took out their cut, you just paid me, not the company.

As for the SEC, you can check out all you want, and a whole bunch more here: http://www.sec.gov/ (or perhaps more specificly: http://www.sec.gov/rules.shtml).

Answer 4

If a company's stock is on the market and being traded, the money is probably not going to the company, it's going to investors (OK, speculators if it's pink sheets) that own the stock and want to sell it.

Companies sell the bulk of their stock at the IPO and at rare, announced secondary sales.  It is possible that the company reserved some stock and is selling on the market, but that's less common.  Less common still is pure 'stock-printing', except of course for penny stocks and pink sheets.

And certainly, the stock may not have the intrinsic value that you are paying for it.  And yes, it could be a pile of garbage, or even just a plain scam company -- particularly on the pink sheets and particularly for penny stocks.  That is why you should research the company before you buy the stock.   And if you cannot find sufficient information, do not buy the stock.

Why are you asking this kind of question after you are already buying shares?  How did you decide the stock was worth buying if you didn't know the answers for this company?  Why are you buying penny stocks?

Answer 5

The pink sheets are not regulated.  It says so on their website.   Thats what makes the pink sheets so risky. Your assumptions are largely correct.