IPO Services

Benefits of reverse merging into a public shell
There are numerous benefits of merging into a public shell for the right companies. Going public with a reverse merger allows a privately held company to become publicly held while reducing costs and diluting less of its stock than with an initial public offering (IPO) without using a shell. Using a reverse merger, the IPO process is built into two steps. First, the company is merged into a shell, and then the company is taken public. Also, depending upon the reverse merger, success is less dependent upon market conditions, and more dependent upon those controlling the public and private companies. In contrast to a straight IPO, a reverse merger is much faster. Depending upon the status of the public shell, a reverse merger may take anywhere from 30 days to 120 days. A standard IPO can take a minimum of one year to complete while using a tremendous amount of management’s time. Of course, this is costly since if management is spending time on the IPO they are not spending time running the company.

Reverse merging into a public company opens new financing options including

  • Issuing stock in an additional secondary offering
  • Exercising warrants, where stockholders may purchase additional shares at predetermined prices
  • Increase liquidity of company stock
  • Higher company valuation since share prices may be higher
  • Using stock to acquire other companies in order to grow the business
  • Using stock incentive plans to attract and retain valuable employees
  • Overall greater access to a variety of capital markets

Here are some famous companies that use reverse mergers to grow their business

  • Nucor – a Fortune 300 company
  • America West Airlines
  • The New York Stock Exchange was acquired by Archipelago holdings to form NYSE Group
  • ABC Radio was acquired by Citadel broadcasting company to spin-off from Disney
  • Frederick’s of Hollywood parent FOH Holdings was acquired by apparel maker Movie Star to take the lingerie maker public
  • Clearwire Corporation was acquired by Sprint