Defining a Reverse Merger
or Reverse Takeover:
A Reverse merger - at times also referred to as a reverse takeover (RTO) - is a way by which a private company can become a public company
and take advantage of the greater financing options available to public companies. The reverse merger is an alternative to the traditional IPO
(Initial Public Offering) as a method for going public. Reverse takeovers have historically been used by businesses that wish to start trading
in a very short time. However, recent SEC (Securities and Exchange Commission) regulations require that when doing a reverse merger information
similar to an S-1 registration statement be filed.
A reverse merger is a complex method that a private company uses to become a publicly traded corporation. Reverse mergers happen when a
public company that is no longer actively involved in business and has limited assets (that's why it's called a shell company or shell corporation)
joins or merges, with a private company. The private company buys most of the outstanding shares of the shell company, gaining control and seating
its own board of directors. The resulting merged business entity becomes a new operating company and may change its name to better reflect the
newly merged company's business purpose.
Reverse take overs are one way for a company to go public. Companies interested in going public can go public without the use of a shell corporation.
Our firm takes companies public directly. The going public process is attractive to businesses because after becoming a publicly traded company,
the business can use its stock as currency to buy assets and other businesses. Many companies will use the stock of their public company to trade
for advertising. Raising capital often becomes easier to accomplish as a public company because investors now have a clear exit strategy.
Reverse merging is the joining together of a public company and a private company. This can speed up the process to become a public company.
It is still required by SEC (Securities and Exchange Commission) Form 8K to provide some of the information that would be in an SEC registration statement.
Many company directors and officers don’t recognize there are other ways for a private company to become publicly traded, outside of doing a
traditional IPO (Initial Public Offering) or a reverse merger.
As a strategy to go public it is not necessary to do a reverse merger. You can do a direct registration of your company. Many of the benefits
bestowed upon public companies also apply to companies created through a direct registration, to include:
• The greater choice of financial opportunities available to public companies.
• An exit strategy for the company directors and founders.
• Investors are more compelled to invest in a company with a clear exit strategy.
• The ability to use the company stock as currency to acquire other businesses (M&A).
Let Our Many Years Of Experience Guide Your Public Company Creation:
The president of our firm is a very experienced securities attorney. Please contact us if you would like to take your company public.
We are ready to assist you with free reports and other information that explain in detail the going public process. We have reports available
on the subject of reverse mergers.