What is a Reverse Merger?

[MoneyMaker]

A Reverse Merger is an alternative to the IPO (Initial Public Offering). It is a method for a private company to be traded publicly but it is faster and less expensive than IPO.
Here is a small comparison between the two Methods:

1) Reverse Merger:
The owner(s) of the company purchases a Shell Stock. After the reverse merger is completed the the company is publicaly traded, the cpmpany has yet to recieve capital. Usually most companies raise the capital by selling to PIPE (Private Investement in Publiv Equity).

The Cost of all that is alot less than completing an IPO and also takes alot less time sometimes between 2-4 months.

2) IPO (Initial Public Offering):
In this process, the private company utilizes the services of an Investment Banking firm to sell its stock to the public for the first time, thus, raising the needed capital. It can be very expensive. The cost for legal and accounting fees, underwriter fees, marketing fees, printing fees, and various other fees can cost several million dollars. Also it takes alot more time than the Reverse Merger. After completion ay individual can buy the stocks through the brokerage firm.
The Bank that does the underwriting can decide when to go public, how much capital to raise and so on. So the owners are not totally free.


After All:
Reverse Merger:
Advantages:

1. Quiker
2. Cheaper
3. Owner Have complete decision making

[lktennis55]

Wow. THanks for all of the information. I really hadn't known what a reverse merger was previously.