I’ve spent some time reviewing the proxy statement for Central Federal Corp’s share buyback. As it was 90 pages long, I can’t say that I’ve read every single word, though.

I’ve also spoken with someone from the company’s investor relations department. She confirmed that, assuming the measure is passed, the transaction will occur automatically and the funds should be deposited into my brokerage account. Although it won’t be instant, she confirmed everything will be completed no later than March 31 (as per the proxy statement).

I believe there are still some risks. Namely:

• the shareholders may not approve the reverse stock split and privatization
• the board may decide to lower the overall share purchase price, thereby either reducing or eliminating my profits
• the board may alter the split ratio; it had previously been 1-for-500 and was changed to 1-for-325, so it is conceivable they could change it to 1-for-250 or 1-for-100

As I haven’t yet found any surprises, I recently purchased a few more shares to increase my position. If all goes well, I will have gained about 19% in less than six weeks.

George from Fat Pitch Financials recently pointed out an article on Yahoo Finance about this special situation. Essentially, new government regulations are making it more expensive for small companies to remain publicly traded. This could mean a surge of privatization announcements in the next few months.

I love the idea of a virtually guaranteed return in a short period. However, there are some challenges with each opportunity:

• the reverse split size limits upside profits, only allowing for a few hundred shares of each company
• the buyback price is no more than a dollar or two more than the current trading price, limiting overall gains to a few hundred dollars
• the shareholders could vote against the reverse stock split (although that seems unlikely as it will benefit the company in the long term)
• the company could change the terms at the last minute

I hope to find many more of these opportunities as an alternative revenue stream to compliment my other investing activities. If researched and planned properly, it may be possible to generate a substantial monthly income. I will personally be striving to achieve $1000 per month in profits from these opportunities. I may need to fund five or more each month to achieve this.

I would much prefer using the Internet and reading a few proxy statements than actually working for a living– isn’t that what being wealthy is all about? As always, I will keep you posted.