In the past some companies would go public by doing a reverse merger with a public shell. A reverse merger with a public shell it can be very expensive & dangerous. There are several things you must be aware of.
There are several types of public shells, which are all very expensive. They are also usually loaded with liabilities. If you reverse merge a company into a public shell (which usually has 100 or more shareholders and a lot of shares in the float) when the stock price goes up these 100 shareholders inevitably sell the stock and the price collapses. This can be detrimental to a company trying to grow through acquisition. This is far more expensive than the up front price paid to do the reverse merger with the public shell. Please keep this fact in mind when you are dealing with reverse mergers or public shells. This point is absolutely critical to understand. If you do not understand the importance of the public float your going public experience can be less than pleasant.
There are also non-trading public shell companies. These reporting companies usually have 1 or 2 shareholders and they are virtually useless. They are a gimmick used by stock promoters to sell you something. It actually takes longer than if you were to just take your own company public from scratch. The non-trading shells just add an extra step and do not save you anytime whatsoever. In fact they take longer than if you were just to start the process from scratch.
Many people think you need to do a reverse merger with a public shell to go public, which is incorrect. Others think that doing a reverse merger with a public shell is faster. Again this is another misconception. For example, to start trading on the Pink Sheets is very fast. A company can always move up to the NASD OTC Bulletin Board or NASDAQ later. Some companies choose to start out on the Pink Sheets and later move up to NASDAQ or the NASD OTC Bulletin Board. A company can also elect to begin trading on the NASD OTCBB from the outset.
Also recent changes in the law have made many practices dealing with reverse mergers and public shells fraught with problems. It is always recommended you have a very experienced Securities Attorney assist you whenever dealing with Public Shells. If you are considering a reverse merger with a public shell contact us before making any costly mistakes. We would be happy to explain why there are better, quicker, easier and less expensive ways of going public.
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