Well Marc as if you didn't know but this may help a little:
FROM WALL STREET JOURNAL..Reverse Merger vs. IPO
Going Public by Reverse Merger
In 1970, with no cash and in an exchange of stock, Ted Turner
gained control of publicly traded Rice Broadcasting (WJRJ-TV)
using a little known maneuver called a reverse merger.
Virtually insolvent, but with a bold vision and control of a
public company, he was able to tap the capital markets of
Wall Street. His stock in the former Turner Broadcasting System
(TBS) now Time Warner (TWX) is worth over three billion dollars.
In February of 1996, Wall Street's top woman Muriel Siebert,
who in 1967 became the first woman to buy a seat on the
New York Stock Exchange., took her brokerage firm
Muriel Siebert & Co, Inc., (SIEB) public through a reverse
merger with J. Michaels, a liquidated Brooklyn furniture company.
The legendary Arman Hammer invested in a public shell
company in the 1950's and created an International company with
14,300 employee's worldwide and operating revenue of $10.6 billion
in 1996. It's known as Occidental Petroleum Corporation (OXY).
Reverse Mergers bring Public Shell Companies back to life. Companies
usually go public by finding an underwriter and filing a Registration
Statement with the Securities and Exchange Commission (SEC). An
alternative method of going public is to effect a reverse merger
into a public shell company.
When the reverse merger is complete the operating company
that wants to be public is merged into the public shell company. The
public shell company is the legal surviving corporationThe name of
the public company is changed to the name of the former private
company and the controlling shares are transferred to the officers
of the former private company. The net effect is that the former
private operating company is now public with the same business,
officers, directors with its shares being traded on the over the
counter (OTC) Bulletin Board or on NASDAQ. The old
shareholders of the public shell company also benefit; their old
worthless shares now have value
Reasons to Go Public
The public company achieves liquidity for its shareholders through
the OTC Bulletin Board or NASDAQ. Insiders "controlling shareholders"
also achieve liquidity under Rule 144, which allows control people to
sell, unregistered stock under certain conditions. A public company can
use its stock to purchase other companies, collateralize loans or reduce
debt in exchange for stock. Employee stock option plans also increase
incentive.
The capital markets of Wall Street could open to the company through
private placements and secondary stock offerings once the market for
their shares is established. Capital can also be raised through Reg S,
offerings to foreign investors. Under certain conditions free trading
stock can be created to reimburse for services rendered, under an
S-8 Registration.
Why Shell Mergers?
There are four major advantages of a shell merger. It is a less
expensive method of going public, and if the shell has capital,
you will know before the shell merger precisely how much equity
you must give up for that capital. In the traditional IPO, you do not
have assurance as to how much capital you will actually receive
until the effective date of the IPO, after you have already spent a
substantial sum. After the merger, the existence of a public
trading market in you company's stock is a very useful in attracting
additional capital, since the market provides immediate liquidity for
the investor. And finally, if the shell has a tax loss carryover,
that carryover, subject to significant limitations, may be available
to shelter the taxable income of your business. |
