This type of transaction can be accomplished much faster than a traditional IPO (Initial Public Offering) because the public ’shell’ company has already gone through the processes required to be a public company. It will have a ticker symbol issued a and will be fully up to date on all filings required.
The reverse merger has recently become more accepted in the capital markets, mainly due to the fact that the IPO, in a volatile market, carries with it uncertainty of funding and is traditionally a much lengthier process than a reverse merger. Many companies who are seeking funding are attracted to the speed at which a reverse merger can be achieved which reduces management downtown and the fact that a reverse merger, if properly documented, is a certain way of achieving public status.
Smaller companies are generally the best suited to performing a reverse merger however some companies that you may have heard of have taken this route:
Turner Broadcasting System (Ted Turner), Occidental Petroleum (Armand Hammer), Berkshire Hathaway (Warren Buffett), Tandy Corp., Texas Instruments, Blockbuster Entertainment, and Waste Management. Tony Robbins reverse merged his company into a small medical company, GHS, Inc., which sent the stock soaring from $.75 to $20. That company was DreamLife Inc.
While the IPO marketplace virtually imploded in 2009 the reverse merger marketplace benefited greatly from the 2008 melt down. Companies seeking capital wanted the fastest and most efficient way to go public in 2009. With underwriters running for the hills for traditional deals companies chose the reverse merger into an OTCBB shell accompanied by a fund raising to fulfill their requirements. Once considered the poor man’s choice of the public markets, the reverse merger has now become the defacto solution for many companies seeking access to the capital markets.
