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Reverse Mergers

In a Reverse Merger, a private company merges with a public company that no longer has a business but maintains a listing (a 'shell'), generally on the OTCBB or Pink Sheets. A Reverse Merger is typically a cheaper and faster way to access public markets without a formal IPO and may offer an attractive alternative to private financing. It is often done in conjunction with a 'PIPE' (Private Investment in Public Equity) whereby private investors are given opportunity to invest on terms not available to public.

We believe we are at the early stages of a fundamental change in the perception and volume of these types of transactions.

  • IPO market remains very selective
  • M&A good for VC investors, not great for most management teams
  • Valuation arbitrage available for late stage private-to-Reverse Merger
  • New stories welcomed by fundamental investors

Factors that create a successful Reverse Merger

  • Execution of Company's business plan is paramount
  • More trading volume in the public company generally equals better stock performance
  • After executing the Reverse Merger, the Company needs to maintain active and well-managed IR program
  • Company has a qualified and properly structured Board of Directors and Management Team

Benefits vs. IPO

  • Shorter timetable to public status than IPO -- 10-12 weeks vs. 4-6 months
  • Less risk for the company
  • Relative ease of execution compared to an IPO
  • Raise capital without conventional IPO minimums
  • No wait for market/underwriter bandwidth, etc.
  • Expansion of investor universe interested in alternative investment transactions

Benefits vs. Private Round

  • Public companies valuations are higher than private companies
  • Increases ability to recruit employees with stock options
  • No concentration of ownership at the Board level

Benefits of our approach

  • Optimize shareholder valuation
  • Timing of equity raise -- accretive financings as market conditions permit
  • Provide near-term liquidity for investors that want it
  • Provide growth capital to capitalize on opportunities -- public stock for acquisitions