Subject: S7-8-97
Date:2/21/97 10:27 AM
 
 
Dear Sirs;
 
As an consultant to offshore purchasers of convertible debt and equities
by domestic, reporting issuers, I would like to discuss the issue of the 
length of time these securities would be "restricted" under your proposed 
guidelines.

The purpose of Regulation S is to allow domestic companies access to
equity capital at a low cost with a minimum of regulation and I believe, 
despite abuses, the provision has worked well for those companies.

However, as you are aware, many of the companies issuing such debt and
equities, even reporting companies, are smaller, more risky companies and 
have a higher chance of failure due to either adverse financial factors, poor 
management, or in some cases, fraudulent activities on behalf of management.

Therefore, it is not unreasonable to expect foreign purchasers to be
paid a premium, whether through a discount, the issuance of warrants, etc. 
for the increased risk of their investment.

In our view, the lengthening of the "restricted period" to two years
will be a severe burden to foreign investors and will effectively close off 
these capital sources as investors judge the chances of business failure too 
high to justify the risk, thereby reducing domestic companies from seeking 
the capital they need.

We feel that a period of three to six months would be the maximum time
under which these issuances should be held restricted.

We applaud the new proposals regarding hedging as these activities have
been extremely detrimental in the past to the existing stockholders.

It is important that existing stockholders be informed before exercise
or sale of these offshore transactions that such issuances have taken place 
either through filings of 8K or 10Q statements. Thus, the restricted period 
should be at least three months to allow companies to file these offshore 
sales without undue burden. It may even be reasonable to set the date of the 
restricted period to something like 30 days subsequent to such filings.

We also applaud the proposals for restricting the use of promissory
notes and other non-cash sales; these are not in the spirit of the 
Provision's intent to help provide liquid capital.

In closing, I would like to stress that the purchase of equity and debt
under Regulation S provisions is, even without these new restrictions, a very 
risky venture for offshore investors today. As a consultant, we have more 
often than not recommended offshore purchasers avoid the majority of 
issuances over the last two years. The increase in holding time to one year 
or two will place an almost insurmountable risk burden to these purchasers 
and will, under the current proposals, serve to severely reduce if not 
completely eliminate domestic companies' use of these important, low-cost, 
fund-raising vehicles.
 
 
Respectfully,
 
John S. Newberry

President
Magnet Communications
PO Box 5620
Beverly, MA 01915