101 D

Lou Hoskins and Shirley Crothers are organizing Red Lodge Metals Unlimited Inc. to undertake a high-risk gold-mining venture in Canada. Lou and Shirley tentatively plan to request authorization for 400,000,000 shares of common stock to be sold to the general public. Lou and Shirley have decided to establish par of $0.03 per share in order to appeal to a wide variety of potential investors. Lou and Shirley feel that investors would be more willing to invest in the company if they received a large quantity of shares for what might appear to be a “bargain” price.

Discuss whether Lou and Shirley are behaving in a professional manner.