Let’s say you and I go into business together. (I’m going to call you Joe, is that OK?) We are going to sell advertising in our local town. We’ll put together a magazine, with stories on local happenings, which we’ll give away for free. But within the magazine, we’ll have ads that we sell to local businesses.

Funny aside, in my town of Kensington, Maryland we just received such a magazine in the mail. The woman who put it together recently moved here from England where she had run a similar business. For those of you looking to make money outside of the stock market, feel free to steal the idea. You could move from print to running their Facebook ads, etc.

Back to our business. We’ll set up a company and file all the appropriate paperwork. I’ll do most of the work, talking to business owners, selling the ads, putting together the stories, etc. and you, Joe, put up most of the capital.

Fairly standard relationship here in the U.S. Capitalist model, investment going to its highest return, etc. because you believe we’ll do well. We work it out between ourselves, and you’ll get 80% of the company and me 20%.

We think this a good idea, and we even have dreams of going public someday. We’ll do magazines for every small town in America, maybe using a franchise model.

So we set up a company structure that allows for that to happen. Whatever the SEC rules are, we follow them. We have attorneys, accountants, the whole 9 yards.

Things go great, we sell ads like you wouldn’t believe. We even sell an ad to old man Drucker at the general store. And Floyd buys an ad for his barber shop. Boom, we’ve hit it big and now we’re going to rake in some cash by going public so we can expand the business.

The lawyers and accountants do all the paperwork, file whatever needs to be filed with the SEC, and we’re public.

Now, we’re still going to keep this real simple. Since I’m going to keep running the business, and you still want to be an investor, we only sell 50% of the company to the public and we keep the other 50%. Again, extremely common in the U.S. public markets.

The way we worked it out, you sold half of your shares and I sold half of mine. So you now own 40%, I own 10%, and public shareholders own 50%.

While we’re going through this process of going public, you and I talk about the future.

The conversation goes something along the lines of “I love this business, we get to provide a service to the community, and meet other business owners. Lots of fun. But someday I may want sell the shares we didn’t offer to the public. I don’t know, but I’ve got other businesses I may want to invest in, or I may just want to cash in some of the shares and take a nice vacation to St. Croix”. Highly recommended, BTW.

Makes sense. We do some thinking and run out the idea of where and what we’ll be doing next after I’ve built the business that you were savvy enough to invest in.

We tell the lawyers and accountants this as we’re planning to go public, and they respond with a “totally cool. When you guys took the company public the rules required us to tell how much of the company you were selling, who owned what, etc. So all the public shareholders know all about who owns what.”

They tell us that if we ever want to sell any of our shares we just have to publicly register them with the SEC ahead of time. Then we can sell them, or not, whenever we want.

Or we can give them as gifts that others can sell, or we can use them as collateral in other business deals, or we can sell them to the public on the stock exchange.

They tell us it’s very common. Actually happens EVERY SINGLE DAY. We just have to follow the rules, and tell everyone they are registered in a public filing. Otherwise we can’t do anything with them.

Now, imagine my surprise when I read in our local paper, right after we have filed this registration thingy, that,

Two months ago, Joe, said he was “pleased” to be part of such an exciting company at the forefront of advertising innovation. Less than two months later, though, it seems as if Joe would be “pleased” to have his money invested elsewhere. After the proposed sale, Joe would own no company shares.

The Podunk Gazette, February 7, 2019, “Joe is Screwing All of Us Over, That Dirty Joe”

When I contact you and ask why you’re such a Dirty Joe, you remind me of all the public documents we filed, the conversations about being able to sell, or do whatever we want with our shares, and all that other jazz. OH, Yeah, I totally forgot. That’s how this game works. That’s right, this happens LITERALLY EVERY DAY. Sorry Clean Joe.

OK, I think that’s as far as I can carry the story.

Look, I don’t know the management or founders of Phunware. They could all be crooks, or they could all be stand-up guys and gals trying their best to bring a product to market that they think will compete with Facebook and Google. I will say they have been very professional in addressing questions I’ve put to them via email concerning the warrants.

I know a little about the tech, I’ve read the info they present on their website, sounds like a cool company. But, I have no idea where the company should be valued, and no opinion on whether it’s a good investment or bad investment. I’m just a simple warrant trader.

BUT, I do think it’s a shame when a company does what it’s supposed to and files a registration statement allowing owners to sell shares and its characterized as some sort of knock on the company. It happens LITERALLY EVERY DAY, and it’s what EVERYONE should expect.

It’s called a pattern. It’s neither good nor bad. Learn the patterns, use your own judgement, and make some money off of it. I think that’s why we’re here, right?