Reverse Mergers

A reverse merger is an alternative to an initial public offering (IPO), which allows private companies to become public. An IPO can take up to six months or a year to complete; however, conducting a reverse merger may only take a few weeks. In addition, while IPOs involve raising capital, reverse mergers do not. In reverse mergers, the private company first purchases buy majority ownership of a public company. When the private company has acquired adequate shares, its stockholders exchange their shares for shares in the public company. Thus the private company has become public. In most cases, the public company is a shell corporation initially. A shell corporation holds little to no assets and capital.  This changes when the private company’s operating business is merged into the company.

Advantages and Disadvantages

Reverse mergers are cost-effective, timely alternatives to IPOs with valuable advantages. For example, if the target public company is registered with the SEC or listed on a stock exchange, the private company does not have to go through that same hassle, saving immense time and money. Additionally, foreign companies can quickly integrate into U.S. public markets through a reverse merger. Sometimes issuers will decide to initiate a reverse stock split; this means that the overall number of shares in the company decreases while the price per share increases. Companies typically initiate a reverse stock split to inflate share price. This keeps them from being delisted from their exchange.

A primary disadvantage is the reputation of the target shell company. Often, shell companies engage in shady market activities; they are closely scrutinized by the SEC.

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Why Issuer Consulting?

Issuer Consulting helps you complete your reverse merger smoothly. We will:

  • Weigh the benefits and drawbacks of conducting reverse mergers versus IPOs
  • Find a target shell corporation with a strong reputation with the SEC to mitigate your risk
  • Discuss methods on how to raise the necessary capital to buy a public company’s shares to initiate the reverse merger
  • Determine if a reverse stock split would benefit your company
  • Assess how to consolidate shares as well as the inflation of share price
  • Help you fill out the necessary forms, such as a Form 8-K to ensure you meet the SEC’s requirements
  • Determine if a reverse merger is the best option for your company

Discuss

Explore the advantages and disadvantages of conducting a reverse merger versus an IPO

Ensure SEC compliance

Ensure that you fill out the necessary forms to complete a reverse merger in compliance with the SEC

Explore

Explore the option of conducting a reverse stock split and discuss how to effectively complete this action

In your consultation, Issuer Consulting will consider all of the potential benefits and drawbacks to conducting a reverse merger that are specific to your company. If you decide to conduct a reverse merger, we will make sure you maintain compliance with the SEC. If you decide against a reverse merger, we will openly discuss alternatives. Contact us today to receive quality advice that will help lead your company to success.

Contact Issuer Consulting today!