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Microcap & Penny Stocks : TGL WHAAAAAAAT! Alerts, thoughts, discussion.

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To: nolimitz who wrote (31613)	2/29/2000 12:11:00 PM
From: SSP	Read Replies (2) of 150070

Reverse Mergers - Overview A "reverse merger" is a method by which a private company goes public. In a reverse merger, a private company merges with a public company usually with no material assets or liabilities. (The public company is also called a "shell" corporation). The public company is called a "public shell" since all that exists is its corporate structure. By merging into such an entity, a private company becomes public. The private company merges into a public company and usually obtains the majority of its stock (usually 90%-95% or more). The private company normally will change the name of the public corporation (often to its own name) and will appoint and elect its management and Board of Directors. The advantages of public trading status, which are outlined in greater detail below, notably include the possibility of commanding a higher price for a later offering of the company's securities. Going public through either a reverse merger or a customized registration statement (described below) allows a private company to go public typically at a lesser cost and with less stock dilution than through an initial public offering (IPO). While the process of going public and raising capital is combined in an IPO, in a reverse merger these two functions are unbundled. Through this unbundling operation, the process of going public is simplified greatly. The private company which has gone public may obtain the following benefits: Increased liquidity of the ownership shares of the company Higher share price and thus higher company valuation Greater access to the capital markets through the possibility of a future stock offering The ability of the company to make acquisitions of other companies using the company's stock The ability to use stock incentive plans to attract and retain key employees Going public can be part of a retirement strategy for business owners. -------------------------------------------------------------------------------- The benefits of going public through a reverse merger, as opposed to an IPO, may include the following: The costs are significantly less than the costs required for an initial public offering The time is considerably less than that for an IPO Additional risk is involved in an IPO in that the IPO may be withdrawn due to an unstable market condition even after most of the up-front costs have been expended IPOs generally require greater attention from top management While an IPO requires a relatively long and stable earnings history, the lack of an earnings history does not normally keep a privately held company from completing a reverse merger There is less dilution of ownership control The company does not require an underwriter You will receive a higher valuation for your company

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