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Case Studies
California Western Railroad, Inc.
This railroad has operated since 1885, from the California coastal town
of Fort Bragg through the mountains to Willits, where it brought lumber
from the owner’s mill. Its nickname, “the Skunk Train,” came when the
original steam engines were replaced by smelly gas motors.
A group of Fort Bragg residents purchased the railroad in 1996 and
operated it primarily for tourists. The new owners decided to raise
capital for improvements, by offering shareownership on a broader basis.
The railroad filed a Regulation A offering with the federal Securities
and Exchange Commission, for a $4.6 million maximum amount. The markets
were principally other Fort Bragg residents and the avid fans of the
Skunk Train. An additional market was the broader group of railroad
hobbyists.
Permission of the California Public Utilities Commission was a major
step in the process. In return, this approval put the offering within a
securities filing exemption in each of the states for an offering by a
regulated railroad.
The railroad went through many difficulties during the offering period.
Weather caused stoppages while repairs were made. The local lumber mill
was on again, off again in its operation and shipping. Connection with a
long-distance railroad went off-line. There were management changes.
The ongoing offering had to adapt to these events. With amendments being
made to the offering circular, the marketing continued for nearly three
years. The amount raised was less than expected. However, most other
sources of capital would have been shut out completely by any one of the
negative events. |
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