Reverse Mergers: Beauty or Beast?

By: Valerio Giannini

Reverse Mergers can’t be all bad. Even the New York Stock Exchange did one.

Reverse Mergers, however, like Pit Bulls, have a bad reputation, often well deserved, but not always. Reverse Mergers are a quick and relatively inexpensive way to become a Public Company, but there are limitations and pitfalls, as many Chinese companies that did reverse mergers with U.S. Shells have learned.

Determining Why You Want To Be Public Is The First Step

Before considering becoming a Public Company, by whatever means, the first step is to achieve a clear understanding as to:

  • The reasons why the company thinks it should be Public.
  • The regulatory and compliance requirements involved in being Public.
  • The ongoing cost and effort of fulfilling those requirements.

The desirability and feasibility of being Public is a trade-off between the needs and objectives of the private company and how they expect to benefit from being Public vs. the costs and demands of being Public.

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