Reverse Merger And Accredited Investors

By: Frank Roberson

Reverse mergers are considered as a worthwhile pursuit by many company directors and they envision the day when their private company can join the ranks of the capital markets as a publicly listed company.

Nevertheless, there are multiple ways that a private business can use to go public and attract capital. The most common is the IPO (Initial Public Offering). An Initial Public Offering is when a previously private business originally offers its shares to the general investing public.

When a closely held private company visits the requirements needed to do a reverse merger - sometimes called a reverse takeover - with a shell corporation, it is as a means for becoming a publicly traded company quickly and perhaps offering the private company founders and directors an exit strategy.

In the case above, the publicly traded company is referred to as a "shell," because all that�s left of the original company is the corporate organization and trading structure.

In public shell reverse mergers the shareholders of a private business acquire control of the public shell, and then merge it with the private business. The private company's shareholders get the biggest part of the shares of the shell company, thereby retaining control of the board of directors.

Nonetheless, the specifics pertaining to a reverse merger are many, and perhaps an overview of the aspects of a public shell reverse merger is a course of action that should be discussed with a corporate financial consultant with a vast understanding of all the applicable SEC (Securities and Exchange Commission) rules and regulations.

When contemplating a reverse merger with a shell company, an excess of items go begging for a response. Principal notions come to the forefront, to include: registered securities, public company audit, filing registration statements SB-1 and SB-2, rule 15c211, initial company valuation, public float, mergers and acquisitions (M&A), form S-8 stock for company founders and directors, accredited investors, SEC accounting practices, strategic planning, rules about raising capital, NASD broker/dealers, and the SEC (Securities and Exchange Commission).

The best going public advice is a requirement before entertaining a reverse merger, since many private company officers are inexperienced and unaware of the dangers of going public via a reverse merger with a public shell.

Some of the benefits achieved by taking a private company public with a reverse merger are better ways to raise capital, since the sources available are much greater versus what a privately held company can attract. Furthermore, if there is a high enough interest from the investing public, the investment outlook regarding the company grows, it could uphold a secondary trading market for the company�s stock. The company can also retain employees by providing stock options. The newly merged company�s securities can also be used as currency for acquiring other businesses (Mergers and Acquisitions).

The countless advantages of taking a private company public far outweigh the simplicity of staying a private concern. The cachet coupled with a publicly traded company is a benefit; the expanded breaks for capital formation for company growth are excellent reasons for becoming a publicly traded company. A reverse merger with a public shell company has its place within the available go public procedures.

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Frank Roberson is a reverse merger and corporate financial consultant with a lifetime of experience helping private and public businesses to raise capital; get more information about Mr. Roberson and => reverse mergers

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