What is a Shell Merger with a Public Shell Corporation?
Reverse Merger, also known as a reverse takeover, is when you merge what is called a public shell (also referred to as a public shell corporation or public shell company) with a private business entity. The shareholders of the private company purchase control of the public shell corporation to merge them together.
After merging the active business enterprise with the public shell company, the result is a public company with an active business in it. The shareholders now own a majority of the shares in the public company and control the board of directors.
The old public shell then changes its name to the name of the private business that was reverse merged in during the reverse merger. This technique is not as desirable as a direct public offering, and is called a “Reverse Merger Public Shell” combination.
To complete this transaction, the private company and the public shell company must exchange information on each other and negotiate the terms of the reverse merger. They must then sign a share exchange agreement.
Reverse mergers have many risks, and should not be your first option to going public. A direct public offering is much more affordable, and carries much less risk.
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