It’s no secret that many businesses use reverse merger as a tactic to avoid traditional IPO process. Merging into a public shell brings several advantages. During a process of reverse merger the control of public shell company is bought by the shareholders of private company, merging with it and becoming public in that way. Because public shell is already registered with Security and Exchange Commission there is no need to do it again.
Reverse merger is considered alternative to lengthy and costly process of traditional IPO. Typically it takes 6-12 months to go public by means of initial public offering, sometimes even more than a year. Also be prepared that it is a time consuming task for your top management and they will be using less time on operating the business. With reverse merger the whole process is much quicker ranging between couple of weeks and four months while also lowering the cost of going public and diluting fewer of company’s stocks.
Market conditions have less impact on the success of going public process with reverse merger while there is more risk attached to traditional IPO. If the conditions on the market are unfavorable offering can be stopped. Market situation has little effect on reverse merger as it is more dependent on the deal between private and public company management.
The major reason why companies undergo reverse takeover is a large number of financing options open to a public corporation. Some of the possible options include secondary offering, issuing additional stock to raise extra cash;shareholders that possess warrants, that allow them to buy extra shares at a predetermined price, by utilizing that options are infusing additional capital. Being a public company brings its own benefits as greater liquidity, potential to increase value of the company, use of stock to acquire new businesses, improvement of capital market accessibility and ability to attract and retain staff among other things.
In addition private foreign companies can use a reverse merger with a U.S. public company as an easier way to enter U.S. market.
In case you are interested in discussing the services we offer for reverse merger process with the public shell as a part of it or buy a public shell, please get in
