The True Role of a Market Maker in the Going Public Process

SEC Attorney Go Public

Market Makers are the most misunderstood players in Going Public.

Only a Market Maker can file a Form 211 with FINRA to get your company a Ticker Symbol as part of the Going Public process. You cannot file with FINRA directly. Your SEC counsel cannot file it for you either. Only a specialized FINRA registered stock brokerage firm called a market maker can file the Form 211 and communicate with FINRA concerning the Form 211 filing.

One of the most commonly misunderstood players in a going public transaction is a Market Maker. In addition to filing Form 211’s, a “market maker” is a firm that stands ready to buy and sell a particular stock on a regular and continuous basis at a publicly quoted price. You’ll most often hear about market makers in the context of the NASDAQ OTC markets. Many OTC stocks have more than one market maker. Market makers generally must be ready to buy and sell at least 100 shares of a stock they make a market in. As a result, a large order from an investor may have to be filled by a number of market makers at potentially different prices.

Market Maker Misconceptions

There are two common misconceptions about what Market Makers do.  I know because people ask me these all the time.

Common Market Maker Misconception One

“I need you to help me find lots of market makers to help promote my company’s stock. I want there to be lots of trading activity in my stock so I need lots of Market Makers.”

Truth:  Market Makers do not promote your stock or create trading activity. They are passive players, merely matching buy and sell orders from investors to maintain an orderly market.

Common Market Maker Misconception Two

“I need you to help me find a market makers to help my company raise money.”

Truth:  Market Makers do not raise money for you. As you know by reading information on my website, you cannot legally raise money by selling your stock in the trading market.  Only people who already own your stock can sell through a Market Maker.  It is true that a FINRA broker dealer can help raise money for you.  However, they do so only in their capacity as Placement Agents or Underwriters, not Market Makers.  Many FINRA brokers that raise money for companies are not Market Makers

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