I'll explain this SEC filing in layman's terms: USGL received $720K for the preferred stock from accredited investors. Initially, the investors get nothing. No shares, no return, nothing. However, because they took the risk of investing, in return for their investment, the preferred stock buyers get the right to purchase shares of USGL 1 year from now at a 50% discount. They will also collect a 12% interest payment (dividend) from USGL. For example, if you had invested $100K through preferred stock, you'd get a $12,000 interest payment (either cash or shares) after 1 year in addition to the right to buy shares at 50% of the market value after 12 months (it's essentially non-dilutive assuming the market cap is way above $720K, which it presently is). So if USGL trades at .05/share in 12 months from now, the preferred stock owner would be able to purchase shares at .025/share, meaning they'd own twice as many shares as if they had just purchased the stock as an ordinary investor at .05. So that guarantees a 100% return on capital in 12 months if the investor flips the stock for a profit. Then there's the 12% dividend, so your total return on capital 1 year from now is 112%. That's an amazing deal, and it's why there are strict standards for who can invest in preferred stock.
This is the benefit of being rich. You can make a greater return when you have more money. Keep in mind, there are high standards for being an accredited investor (personal net worth at least $1M, with income of at least $200K per year for the past two years, with the expectation of making at least that much in the current year). This is to protect those who don't have a lot of money because even though preferred stock looks like a safe investment, there is always the chance that the company goes out of business. Financial regulatory laws take into consideration the fact that those with less money who typically aren't as financially literate as a wealthy individual will take more risk when investing their money, and in the rare event that the company goes out of business, the small investor will feel the pain a lot more than the large investor (think '08/'09 mortgage crisis - big banks bailed out while the middle class got screwed). In other words, liquidity is absent for the 12 months following the purchase of USGL's preferred stock. So if you spent $500K on preferred shares, your money is stuck for 12 months before you have the opportunity to liquidate it. Hopefully, it's obvious why the government needs to be involved in this behavior: if left to the market system, investment banks, lenders, and publicly traded companies would get every cent they could out of anybody, and in the long run that would screw over the middle class and increase wealth among the wealthy.
And a quick word of advice to those of you who will someday be rich: always choose preferred stock if you have the option. It's almost a guaranteed return on investment (unless the company goes out of business).
Ahh, the beauty of Capitalism.
This is the benefit of being rich. You can make a greater return when you have more money. Keep in mind, there are high standards for being an accredited investor (personal net worth at least $1M, with income of at least $200K per year for the past two years, with the expectation of making at least that much in the current year). This is to protect those who don't have a lot of money because even though preferred stock looks like a safe investment, there is always the chance that the company goes out of business. Financial regulatory laws take into consideration the fact that those with less money who typically aren't as financially literate as a wealthy individual will take more risk when investing their money, and in the rare event that the company goes out of business, the small investor will feel the pain a lot more than the large investor (think '08/'09 mortgage crisis - big banks bailed out while the middle class got screwed). In other words, liquidity is absent for the 12 months following the purchase of USGL's preferred stock. So if you spent $500K on preferred shares, your money is stuck for 12 months before you have the opportunity to liquidate it. Hopefully, it's obvious why the government needs to be involved in this behavior: if left to the market system, investment banks, lenders, and publicly traded companies would get every cent they could out of anybody, and in the long run that would screw over the middle class and increase wealth among the wealthy.
And a quick word of advice to those of you who will someday be rich: always choose preferred stock if you have the option. It's almost a guaranteed return on investment (unless the company goes out of business).
Ahh, the beauty of Capitalism.
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