How To Go Public Without Reverse Mergers
How To Go Public Without Reverse Mergers Or Public Shell Corporations
?Going Public? is the procedure of selling shares that were once held by a private company to the general investing public for the very first time; many times it has been called an IPO.
Numerous knowledgeable business owners have the grand vision of taking their private business public. The economic incentives and rewards of becoming a publicly traded company provide opportunities seldom offered to private companies. Of course, the prestige and glamour are indicators of success when a private business goes public. Nevertheless, the many ways of going public and, financial responsibilities of a public business, can create a challenging proposition. Taking your company public is a involved method requiring more than a few skills and business acumen; it can also be mystifying and baffling, even for trained professionals.
As companies contemplate going public, the biggest reason is to raise capital.
A necessary outlook of the many ways private companies can join the public markets, and what is the relevant securities law, is in order. The need to consider options with a sober mind is a must.
These are many of the benefits of entering the public markets:
? The available sources of capital will multiply, since your company will be able to approach many more prospective investors.
? All investors ? as well as company principals ? can take advantage of an exit strategy to sell their participation and regain their initial investment.
? Attracting capital is easier, and if the investment outlook about your business increases, it could uphold a secondary trading market for your stock issue.
? By providing stock options your public company can attract and keep key personnel.
In the past many companies used a procedure called a ?reverse merger with a public shell? as a way to go public.
In the above case, the publicly traded company is referred to as a "shell," since all that remains of the originating business is the organizational constitution.
A reverse merger involves this scenario:
In a public shell reverse merger ? also called a reverse take over ? the shareholders of a privately held company purchase control of the corporate shell company, and then merge it with the private business.
The private company's shareholders receive the biggest part of the shares of the public shell corporation, thereby keeping control of its board of directors.
Of course, the risks concerned with a reverse merger are numerous, and possibly a overview of the harmful aspects of a public shell reverse merger is needed.
The following are many of the hidden pitfalls of a reverse merger:
Most existing companies have a background, a history, and shareholders. The background and history can be bad, and can take many turns: sloppy paperwork and record keeping, lawsuits, and many other skeletons in the closet. Besides, public shells may have their share of dissatisfied investors very willing to "dump" at the first occasion, sinking the market for the company?s stock.
The best going public advice should be sought before contemplating a reverse merger, since many private company officers are lacking in experience and not aware of the perils of going public via a public shell reverse merger.
Thoroughness and seasoned guidance can assist your company to conquer all the pitfalls and take your company public in as little as 4 months.
Here are some more benefits of going public through an alternative program to a reverse merger or public shell:
? No reporting requirements
? No mandatory minimum revenue
? No Sarbanes-Oxley
? No asset requirements